Recently, the United States and other Western countries have been incessantly hyping the so-called “overcapacity leading to unfair competition” in China’s new energy sector.
They malign the export of China’s “new three” products — new energy vehicles, lithium batteries, and photovoltaic products — as a threat to the development of other countries’ industries, claiming that “an increase in export commodities equals overcapacity.” This argument is utterly baseless and a complete false proposition.
Equating “an increase in export goods” with “overcapacity” is a conceptual shift that runs counter to the facts. “Overcapacity” means that the production capacity of a specific industry exceeds market demand, resulting in an imbalance of supply over demand.
While China’s “new three” have high production capacities, they primarily serve domestic consumption without large-scale exports, especially to the United States.
Take new energy vehicles (NEVs) as an example, in 2023, China’s total sales of NEVs reached 9.495 million units, with domestic sales accounting for 87.3% and exports only 12.7%. Only 13,000 units were exported to the US, a mere 0.82% of China’s total exports.
Proportionally, China’s exports of NEVs accounted for a far lower proportion of production than countries such as Germany, Japan and South Korea. Comparatively, Germany produced 4.1 million vehicles, of which 3.1 million are exported, with the proportion of exports nearly 80%.
Price is a crucial “wind vane” to judge the relationship between supply and demand. If “overcapacity” claimed by some people from the United States and the West were true, the prices of China’s new energy products should be persistently low on the international market.
In fact, as Chinese electric vehicle exports increased, so did their prices. The average selling price of Chinese electric vehicles exported to Europe is roughly double that of those sold domestically. This increase in both quantity and price clearly indicates a supply shortage, not overcapacity.
The increase in exports of China’s electric vehicles, lithium batteries, and photovoltaic products reflects the comparative advantages formed by China’s comprehensive production-supply chain system, large-scale market demand, continuous technological innovation, and sufficient market competition.
China is the only country in the world that has all the industrial categories listed in the United Nations Industrial Classification. Its manufacturing scale has ranked first in the world for more than 10 consecutive years, with strong industrial organization and supply chain resilience.
In the new energy industry, China possesses a complete industrial chain covering materials research, engineering design, manufacturing management, and final assembly.
The enormous domestic market and diverse driving environments provide fertile ground for the development and iteration of technologies like NEVs and power batteries.
After years of development, China has made continuous breakthroughs in core battery technologies for NEVs, and its photovoltaic power generation, offshore wind power, and nuclear power technologies and equipment manufacturing levels are also leading globally.
Additionally, sufficient market competition invigorates China’s new energy industry, promoting cost reduction and efficiency improvement, making Chinese new energy products of high quality and competitive prices in international markets. Hence, these products are in short supply in many countries, especially developing ones aiming for energy transition.
The development of China’s new energy industry has made great contributions to the global response to climate change and green low-carbon transition, reflecting the role of a responsible major country. In 2023, China contributed over half of the global increase in renewable energy capacity of 510 million kilowatts, significantly boosting global renewable energy growth.
Chinese wind and photovoltaic products are exported to over 200 countries and regions worldwide, helping many developing countries access clean, reliable, and affordable energy.
In 2022, China’s renewable energy generation reduced domestic carbon dioxide emissions by approximately 2.26 billion tons, with wind and photovoltaic exports contributing to an additional global reduction of about 573 million tons, totaling 2.83 billion tons, accounting for about 41% of the global carbon reduction equivalent from renewable energy during the same period.
Over the past decade, the global average cost of electricity for wind power and photovoltaic power generation projects has cumulatively dropped by over 60% and 80%, a large part of which is attributed to Chinese innovation, manufacturing, and engineering. With the expanding demand for international green and low-carbon markets internationally, China, as the world’s largest renewable energy market and equipment manufacturer, will continue to provide high-quality new energy products, which will strongly contribute to the development of the global green and low-carbon transition.
Combined the global division of labor and international market conditions, the current global production capacity of new energy products falls far short of market demand, particularly in many developing countries where the potential demand for new energy products is substantial.
According to the International Energy Agency’s calculations, the global demand for new energy vehicles is projected to reach 45 million units by 2030, 4.5 times that of 2022, and the global demand for new photovoltaic installations will reach 820 gigawatts, about four times that of 2022.
A country’s vigorous development of artificial intelligence industries also requires foundational support from new energy generation and storage facilities. China, as an important producer of green products, continues its production activities in line with the laws of market economy.
Thus, China’s new energy product exports are not excessive but rather deeply meet global urgent needs, providing crucial support for countries worldwide, including many developing nations, to cope with climate change and promote green transformation and development.
The US and other western countries accused China of new energy “overcapacity” without any factual basis. Using this as an excuse for trade protection measures will damage the stability of global industrial and supply chains and hinder the growth and development of emerging industries, impeding the international community’s green transition to deal with climate change. The concept of “overcapacity” has been politicized and instrumentalized by the United States and its allies, violating economic principles and general trend of global changes, which aims to suppress China’s technological development and industrial upgrading through unfair means and attempts to make China’s production capacity “self-defeating”.
This action is to maintain the monopoly position of the United States and the West in the global economic system and the resulting excess earnings, exacerbating the risk of fragmentation of the world economy, which is not conducive to global prosperity and stable development.
From the so-called “China Threat Theory” to the “China Impact Theory” and now the “Overcapacity Theory”, the US and the West continuously construct variations of the “China Threat Narrative”, which actually make excuses for undermining the principle of fair markets and justifications for protectionist economic policies.
What the United States and the West should do is to abandon ideological disputes, improve the level of governance, and create favorable conditions for enterprise development rather than to hype the fallacy of “overcapacity” in an attempt to trip others down, and make themselves run faster.
In light of these facts, the fallacy of China’s new energy “overcapacity” is self-defeating. International trade is not a “zero-sum game”.
No countercurrent can stop the tide of inclusive and mutually beneficial economic globalization.
All countries and regions should view production capacity issues objectively and dialectically from an economic perspective, adhere to basic market economy principles such as fair competition and open cooperation, and handle trade cooperation disputes according to WTO rules, jointly maintaining the stability of global production and supply chains.
China’s new energy industry will continue to move towards new development and seek changes with “quality” to provide reliable assistance for more countries to realize green low-carbon transformation and sustainable development, so that all countries in the world, including Pakistan, can benefit from the green production capacity, and make a better future for the human society.
Copyright Business Recorder, 2024
The writer is Consul General of China in Karachi
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