'Overcapacity' based on an illogical premise

Some media outlets in the West have been hyping up the issue of China's "overcapacity", claiming that China produces more than it consumes. An in-depth analysis will help set the record straight.

Overcapacity can manifest in various forms, such as absolute overcapacity, relative overcapacity and structural overcapacity. Capacity is a dynamic variable, with both demand and supply constantly changing, and achieving equilibrium is an ideal state that is not easily reached.

A look at statistical data finds more. The utilization rate of manufacturing capacity in the United States was 77.24 percent in the fourth quarter of 2023, while the utilization rate in China during the same period was 76 percent. Given that there is little difference between the utilization rates of the two countries, how can the US justify its accusing China of "overcapacity"?

In international trade, each country produces products with its own comparative advantages and then exchanges them with others to maximize mutual benefits, which is a win-win situation. When designing production capacity, no country should only focus on itself and ignore others, particular China, the only country in the world that has a complete set of industrial categories as classified by the United Nations. With its huge market demand and long-term accumulation of technological innovation, China completed its industrialization process in decades, while most developed countries took hundreds of years. With complete industrial supporting capabilities and abundant human resources, China can produce quality goods for its own needs as well as for the global market, and at reasonable prices, thus benefiting the whole world.

So it is not right to equate China's production capacity exceeding its domestic demand with overcapacity; it does not conform to economic principles. Just as the US sells various financial products to the world, China also sells mechanical and electrical products, textiles and clothing etc to the US. We exchange what we need with each other to achieve mutual benefits. There is no such thing as overcapacity.

IFENG.COM