Opinion | Overcapacity? China’s competitive edge lies elsewhere

The US and Europe point to this overcapacity as the root of unfair trade practices that unnaturally drive down prices beyond where companies can reasonably make a profit. Electric vehicles, solar panels, energy storage technology and much more are allegedly receiving unfair government support which is pricing out local companies in the US and Europe.

There have been a number of reasons given for imposing trade restrictions on China – most notably starting in the Trump era – from security and data privacy concerns to claims that Beijing is “stealing jobs”. But nothing has been as clear and consistent as the recent drum beat of overcapacity.

Despite these practices having been a part of China’s industrial policy for decades, the country now resolutely accuses the West of hyping up claims of overcapacity. To China, these are just the normal production practices of any exporting company and the US is resorting to a smear campaign because it simply can’t compete.

And so, we have hit a stalemate where the issue is seen in black and white. If you take the US side then China’s overcapacity is, of course, a major problem, and if you take China’s side then the whole concept is just American bluster. It boils down to whataboutisms. Either way, this is most likely a short-term discussion that is masking long-term advantages held by Chinese companies that would see them succeed regardless of government support.