Hidden motives behind China's 'overcapacity' accusation

Recently, the United States and some European countries have been hyping up the false narrative of China's "overcapacity", accusing the country of "flooding" the global market with cheap new energy products. Nonetheless, the so-called China's "overcapacity" is not something new. Why do they keep repeating the old rhetoric? What are their hidden motives?

Aiming to hit china's new energy industry

The "overcapacity" accusation overlooks market demand, as well as the strong potential of the global new energy industry. It runs counter to law of economics and international trade rules.

Blaming China for "overcapacity" is not new.

Over 20 years ago, shortly after China's accession to the World Trade Organization (WTO), China's export of high-quality products at more affordable prices was deemed by some as threats, said Zheng Yongnian, director of the Advanced Institute of Global and Contemporary China Studies of the Chinese University of Hong Kong (Shenzhen).

The so-called China's "overcapacity" is in fact a new variant of "China threat" theory, which turns economic and trade issues into political, security or ideological issues, said Zheng.

Fearing that its products can not maintain the position at the top of the value chain in international trade, the US intends to give itself an unfair advantage in market competition by curbing and suppressing China's emerging industries, said John Ross, former director of economic and business policy for the mayor of London.

Therefore, the "overcapacity" accusation is, in essence, a new narrative to attack China, It's another example of US economic coercion and bullying.

Customary practice to maintain hegemony

Looking back at history, any country that was labeled as "harming" the US industrial interest, had been suppressed by the US in various ways.

Since the middle of the last century, Japan's textile, automobile, and semiconductor industries have expanded, but the US has conducted crackdowns on Japan's related industries, by adopting anti-dumping tariffs, forcing Japan to voluntarily restrict exports and expand imports, among others, said Jin Ruiting, researcher at the Institute of Macroeconomic Research of the National Development and Reform Commission.

Today, the US is playing the same old trick again -- using trade protectionism to alleviate its "hegemony anxiety". This lose-lose approach will not solve its own problems, and it will have a negative impact on the development of the global clean energy industry chain.

Political pandering

The US will hold a presidential election this year. The Joe Biden administration's continuous hype around China's "overcapacity" could be seen as an attempt to secure support from the labor unions.

Statistics indicate that eight of the top ten lithium-ion battery manufacturers in the US, eight of the top 12 photovoltaic companies, and two of the top three NEV manufacturers are situated in states won by US President Biden in the last election.

These companies are affiliated with prominent unions, including the United Auto Workers and the Laborers' International Union of North America, all of which have endorsed Biden's reelection bid. Consequently, garnering support from both the public and key industries in these states is crucial for the success of Biden's electoral campaign.

The Office of the United States Trade Representative recently initiated a Section 301 investigation into China's maritime, logistics and shipbuilding industries following a petition from labor unions, alleging that China utilized "unfair, non-market policies and practices" to gain dominance in these sectors. As the US presidential election draws near, it is no surprise that the US blamed China for its own industrial problems.

Although the US government asserts that its trade policy is "worker-centered", its recent moves, including hyping up China's "overcapacity" and launching trade investigations against China, appear to prioritize voter appeal over economic considerations, said Yao Yang, director of the China Center for Economic Research at Peking University.

Deepening reform and opening up

Facing these groundless accusations from the West, China should unswervingly deepen reform and opening up, experts said.

At present, China has built the world's largest, most complete and most competitive clean energy industrial chain. It has also helped stabilize the global industrial and supply chain, enriching global supply and easing global inflationary pressure.

China's electric vehicles, lithium batteries and photovoltaic products, not only meet the growing global demand for green consumption, but also assist many countries in green energy transition, said Li Dawei, director of the Emerging Economies Research Office of the Institute of Foreign Economic Studies of the China Academy of Macroeconomic Research.

The "overcapacity" fallacy can not impede the ongoing transformation and upgrading of China's industries. China's new energy products will play an important role in driving global low-carbon energy transition.