Since the beginning of this year, some officials from European and American countries have frequently hyped up the theory of “excess production capacity” in the category of China’s new power, claiming that this will have a destructive effect on the related properties of Europe and America. Chinese and foreign scholars point out that such hype in European and American countries is only a pretext for commercial protectionism, limiting the import of new power products such as electric vehicles from China, and will only lead to a situation of excessive losses.
Last September, the European Commission conducted a countervailing investigation on China’s manned electric vehicle drive under the pretext of so-called high subsidies and threat of harm. If the results of the investigation are established, high tariffs will be imposed on electric vehicles coming from China. This year, American officials who visited China, such as Treasury Secretary Janet Yellen, expressed their enthusiasm to the Chinese side for distorting global prices and delivery forms due to the so-called excess production capacity in China’s new power sector.
Analysts point out that the strong cooperation ability of China’s new power products is mainly due to the early related property structure, which has created a leading technical advantage through long-term research and development. At the same time, relying on strong domestic property supporting talents, large-scale shopping malls, and abundant human capital, it has created a comprehensive cooperation advantage. As Premier Li Qiang pointed out, the advantage of China’s new energy assets is achieved through genuine skills and is shaped through full cooperation in shopping malls, rather than relying on government subsidies.
Ma Wei, an assistant researcher at the American Research Institute of the Chinese Academy of Social Sciences, told Interface News that after the negative impact of the United States hyping up “excess production capacity” in Chinese industrial products, what is truly worried about is the rapid growth of Chinese new power vehicles and other industries relying on continuous technological renovations, perfect property chain systems, and sufficient shopping mall cooperation. The products are widely welcomed in global shopping malls and are being rapidly imported to Europe and America, which has dealt a strong blow to American and European car companies that have relatively slow electrification transformation.
David Bailey, an economics professor at the University of Birmingham in the UK, also expressed similar concepts. He said that compared to Chinese authorities, car companies, and battery manufacturers fully joining electric vehicles, European car manufacturers have saved a lot of time and capital in developing diesel engines to improve exhaust emissions.
Many analysts believe that the so-called “excess production capacity in China” by some officials in Europe and America is a political object used to suppress the Chinese economy. Behind this slander lies anti globalization and commercial protectionism, which can ultimately harm the common interests of all countries.
Guo Kai, Executive Director of the China Financial Forty People Research Institute (CF40), pointed out at the quarterly micro strategy briefing held by CF40 this week that he does not agree with the United States’ definition of excess capacity and the achievements it has listed.
He gave an example that American scholars claimed that due to China’s crackdown, the US manufacturing industry lost 2 million rest stations. However, in reality, the change in unemployment in the manufacturing industry is a complex achievement that affects multiple identities. The progress in automation and childbirth rates is the key factor that led to the decline in unemployment in the manufacturing industry, and its connection with Chinese commerce is just one of them. In fact, on a global scale, the production industry in many countries, including China, is declining, mainly due to technological progress and property degradation. Furthermore, even without China’s cooperation, the low-end manufacturing industry will not stay in the United States, but will move to other low-cost countries such as Mexico, Vietnam, and Indonesia. Therefore, it is unreasonable to blame China for the decline in production industry unemployment.
Ma Wei stated that the fundamental goal of the United States to win over China’s “excess production capacity” is to find excuses for its protectionism. Like Europe, the United States is facing a situation where the effectiveness of new energy companies is not as good as that of Chinese companies, rather than the so-called “excess production capacity” in China. The United States hypes up “excess production capacity” and indiscriminately applies commercial tariff barriers, which not only violates the domestic commercial rules of the world’s commercial structure, but also can seriously disrupt the global supply chain, ultimately harming the benefits of consumers in the United States and other countries around the world.
In fact, developed countries such as the United States and Germany have implemented strong subsidy strategies in the field of electric vehicles. For example, according to the German Ministry of Economic Affairs, from 2016 to 2023, this sector provided approximately 10 billion euros in subsidies for approximately 2.1 million electric vehicles, greatly driving the growth of the German electric vehicle industry. In January 2023, the United States officially implemented the Inflation Reduction Act, which aims to stimulate the delivery and application of electric vehicles and other green technologies in rural areas through measures including a $369 billion tax subsidy.
Chinese and foreign scholars have also pointed out that the term “excess production capacity” in China, as referred to by Europe and America, is not simply an economic achievement, but also affects issues related to domestic relations and political formats.
Guo Kai pointed out that China is a major player in the global action production industry, accounting for more than 10% of the total output of the global production industry, and its position is crucial. In the past two years, the surplus of China’s production industry has reached 1.8 trillion US dollars per year in US dollars, double the figure before the COVID-19 epidemic. While China’s huge surplus implies deficits in other countries.
“Others are highly concerned about China’s manufacturing industry, because your manufacturing industry is so large and you still have such a large surplus with others, and you basically have a surplus with all countries around the world, which cancels out a significant political achievement. This is not an economic achievement, it is a political achievement.” Guo Kaidao.
In addition, he mentioned that in the United States, politicians often use “China’s crackdown wave” and “excess production capacity” to boost momentum. This year coincides with the United States election year, and by examining the public opinion of current leader Joseph Biden, it can be seen that his appearance targeting specific assets is quite meaningful. In Michigan, Biden announced that he will adopt a high tariff rate for electric vehicles in China; In Pennsylvania, he also proposed imposing high tariffs on China’s steel and aluminum products. Although China has not yet imported an electric car from the United States and the amount of steel imported from the United States is minimal, these issues are still being used to boost momentum. The specific assets of these states play a decisive role in the election results, and Biden needs to compete for election support.
Timothy Huson, who currently resides in Palmyra, Illinois, is a retired metaphysical professor. He told Interface News, “Now that Biden is lagging behind in the official investigation, the White House must do something to make voters feel that they are competing for more overseas benefits for the United States, such as a business dispute with China. However, the topic of ‘excess production capacity’ is not fundamentally substantive. In my opinion, any country can freely produce the goods they want and take responsibility for the effects on their own. Other countries have no right to intervene. If the United States does not like Chinese products, it can greatly increase tariffs and commerce.”
Gernot Wagner, a professor at Columbia Business School in the United States, also stated that politicians introducing tariffs on electric vehicles could provide favorable conditions for promoting inventions. From a public finance perspective, tariffs can be more eye-catching to politicians because they will bring more spending to the authorities. But in the trend of adding carbon, imposing punitive tariffs to raise the price of electric vehicles will only have the opposite effect.
The Bailey Initiative suggests that Europe should learn from the United States and take more proactive steps to support the automotive industry in achieving faster transformation. At the same time, encourage more cost-effective Chinese companies to invest in Europe, as Americans, Japanese, and Koreans did years ago.
Since the beginning of this year, although global sales of electric vehicles have slowed down, China’s new power vehicle market has continued to experience a booming production and sales trend. According to data from the China Association of Automobile Manufacturers, from January to March, the production and sales of new power vehicles reached 2.115 million and 2.09 million respectively, an increase of 28.2% and 31.8% year-on-year, and the market share reached 31.1%.
“The new power industries such as solar photovoltaic and electric vehicles are experiencing a period of ‘difficult production’, and not every participant will cry until the end. Even the ultimate winner will repeat the cycle of ‘large-scale investment excess production capacity’. However, in any case, China’s growth form will be beneficial to China and even the world economy,” Wagner told Interface News.