Is there an overcapacity issue in China's new energy industry?

Question

Jane Wang · Answer

Can’t believe those highly-educated political elites in the West can not come up with some logical narrative to defame China.

If China does have serious overcapacity problem, China’s economy would face huge crisis.

And if that’s the case, what would the US, 'stubbornly' trying to contain China, do?

It’s easy to guess. They would be gloating over China’s misfortune, kicking when the country was down... all those things except lending a helping hand, let alone having Ms Yellen coming all the way to Beijing to remind China that there is a problem to be solved.

This is extremely unusual.

When there’s overcapacity, goods cannot be sold, leading to the closure of enterprises, the bankruptcy of capitalists, job losses of workers, and eventually financial crisis.

So how are China’s “new three” sold globally?

In 2023, out of the 14.28 million NEV sold globally, China produced 9.5 million, accounting for 67%.

China produces more than five times as many solar cells as the rest of the world combined: 85 percent of the world's solar cells, 88 percent of solar polysilicon, and 97 percent of the ingots and wafers that make up the core of solar cells, according to statistics from the International Energy Agency (IEA).

In 2023, China's lithium battery shipments reached 887 GW, accounting for 74% of the world's total shipments.

What’s prospect of the industry?

In 2023, 89.18 million vehicles were sold worldwide.

Assuming that this number remains unchanged in the future (and in fact it will definitely increase), then these 89.18 million vehicles in the future must be NEVs.

So how many NEVs did China produce in 2023? The answer is 9.5 million.

Less than 1/9 of the world's total demand.

New energy is the irreversible trend

In about 10-20 years, we will hardly produce fuel vehicles in the world.

The UK has announced in 2017 that it will completely ban the sale of gasoline and diesel cars by 2040, and only new energy vehicles will be allowed to sell at that time.

In 2022, Europe announced that from 2035 onwards, all passenger cars and light commercial vehicles on sale will have zero CO2 emissions, and the sale of petrol and diesel cars will be banned from 2035.

So all cars would be NEVs in the future.

Where is the future of NEVs? It would be in China.

Automobiles are the concentrated embodiment of a country's industrialization, and whoever masters the automobile will be able to dominate the world in terms of economy and technology.

This is because automobile manufacturing is so complex that it has a long industrial chain, involving many sectors such as machinery, electronics, materials, etc., with NEVs also including the Internet.

The world's economic power must be an automobile power.

China today has showed its overwhelming superiority in new energy industries.

That’s really something that worries the US.

Hendrick Kung · Answer

In early April this year, U.S. Treasury Secretary Janet Yellen, while attending an event organized by AmCham China in Guangzhou, expressed concerns about China's new energy industry, particularly the electric vehicle industry, stating that China's new energy vehicle industry is facing an "overcapacity" problem. Yellen's logic is: that the development and capacity increase of China's new energy vehicle industry is driven by government support, but domestic demand is relatively weak, leading to artificially lowered prices of new energy vehicles that are then exported to Europe and the U.S., causing troubles for local enterprises.

Subsequently, many Western media outlets have voiced accusations of overcapacity in China's new energy vehicle industry. But in this process, the definition of overcapacity has been oversimplified to "production capacity exceeding expected demand." Some reports have even equated "more exports" with "overcapacity."

Without going into whether China's new energy vehicle industry meets the definition of "overcapacity," let's look at some data from the China Association of Automobile Manufacturers: In the first three months of this year, China's new energy vehicle production reached 2.115 million units and sales reached 2.09 million units, up 28.2% and 31.8% year-on-year respectively. Domestic sales accounted for 1.783 million units, up 33.3% year-on-year, while exports were 307,000 units, up 23.8% year-on-year. Reviewing the data from January to July 2023, new energy vehicle production and sales reached 4.591 million units and 4.526 million units respectively, with domestic sales at 3.89 million units and exports at 636,000 units.

From the data, we can see that the main consumer of China's new energy vehicles is the domestic market. In the first three months of 2024, the export proportion was less than 15% of total sales, which does not support the argument of weak domestic demand.

Regarding prices, according to a report by the automotive research company JATO Dynamics, the average selling price of electric vehicles in China is €31,165, while in Europe it is €66,864 and in the U.S. it is €68,023. This clearly shows that Chinese manufacturers have not intentionally underpriced their vehicles to dump them overseas. The lower prices of China's new energy vehicles compared to Europe and the U.S. are partly due to technological reasons, and partly because European and American automakers focus more on the mid-to-high-end market, while China is focused on exploiting many niche markets, resulting in a relatively lower average selling price for China's new energy vehicles. Looking at the overall situation, many accusations against China's new energy vehicle industry do not hold ground.

We can further explore the definition of overcapacity. The concept first appeared in Chamberlain's "The Theory of Monopolistic Competition," referring to a situation where the product supply capacity exceeds market demand at the equilibrium price, exhibiting a persistent state of overcapacity. This mainly applies to some monopolistic competition industries. Some views suggest that overcapacity is the result of strategic behavior by enterprises in oligopolistic competition, but this theory is difficult to apply to the current global new energy vehicle industry with increasingly fierce competition. Another perspective is that "overcapacity" is the result of enterprises misjudging market demand due to incomplete external information and consequently following the herd to invest. But this does not apply to China's new energy vehicle industry, as the market information is relatively transparent, the number and dynamics of manufacturers are relatively stable, and the government is committed to reducing the information costs for manufacturers, making it unlikely for a "herding effect" to occur.

The main indicator currently used to judge overcapacity is the capacity utilization. It is generally believed that this is the ratio of actual output to potential capacity. According to data disclosed by the Economic Daily, the capacity utilization of China's new energy vehicles is currently above 70%, which is not a very good figure, but also not bad. When combined with the future development of the industry, this capacity utilization is within a reasonable range. Moreover, to address a series of ecological problems such as global climate change, the promotion of energy transition has become a global consensus, and new energy vehicles play an indispensable role in energy conservation and emission reduction. Future demand for new energy vehicles will continue to rise, and in this context, China's production capacity will also be able to maintain a stable supply in the future. From this perspective, the capacity utilization of China's new energy vehicles will most likely continue to rise.

The assertion of "overcapacity" in the new energy vehicle industry is rather absurd, as few people would consider overcapacity to be a phenomenon in an emerging industry. Governments around the world are now discussing carbon neutrality and setting net-zero emission targets, and China has also committed to strive to achieve carbon neutrality by 2060. China is facing the technical challenges of the clean energy transition and has set the goal of improving the energy efficiency of electrification as a technical transformation to reduce carbon emissions, with improving the quality of electric vehicle batteries and encouraging the electrification of public transportation as part of its emission reduction path. Energy conservation and emission reduction work is ongoing, and there is still demand for the purchase or replacement of new energy vehicles in China and the world to achieve carbon neutrality. Where does the "overcapacity" come from?

China itself is very concerned about its industrial capacity, and this concern stems from the experience of the 2008 financial crisis. After the financial crisis, China's economists devoted a lot of effort to thinking about the solution to the "overcapacity" problem, and the policy departments of the government also drew on the thinking of the academic community in their economic work. In recent years, China has been deepening the supply-side structural reform, and one of the important instructions of the government is to reduce the capacity of the steel and coal industries and to expand the scope of de-capacity to the coal-fired power industry. It can be seen that the Chinese government is also alert to the negative impact of overcapacity on the economy, and it can also be seen that de-capacity measures are generally targeted at energy-intensive and disorderly traditional industries. In this year's Report on the Work of the Government, the State Council also emphasized the need to prevent overcapacity and poor-quality, redundant development. Therefore, China is more concerned about the issue of "overcapacity" than the West, and from the data and official statements, at least in the new energy vehicle industry, there is no "overcapacity" situation.

In this way, is it a rhetorical trap stemming from trade protectionism to obscure China's dedication and advantages in the field of new energy vehicles as the "overcapacity" issue?

PC Yu · Answer

The questioner has been fooled by Yellen. Below is my post.

In 2023, US Secy of Treasury J Yellen used "US national security" to ask China to stop development. In 2024, Yellen invented a new term "overcapacity". What causes Yellen's so-called overcapacity? It is Karma: a 10-plus-year-old US conspiracy backfires USA.

US conspiracy 10+ years ago

China develops & progresses fast. USA becomes paranoid & thus uses its might to suppress China. In name of climate change, USA asked China to reduce CO2 emission ie to reduce manufacturing.

In 2023, by quantity, China emitted more CO2 than USA . By per capita ie by population size, China emitted less than USA. (Chinese population is 4.2 times USA. Just breathing, Chinese emit more CO2 than USA.)

China took the Paris Climate Accord seriously & works hard to develop green energy industry eg electric car, lithium battery, solar panel, wind turbine & more.

In 2024, China's green energy industry is successful, surpassing US & the West in general. ...The West has lost leadership in green energy industry. It is Karma. US conspiracy to suppress China's development & rise has backfired USA.

How does "overcapacity" occur in an open market?

An open market is determined by supply & demand. If there is "over" supply, consumers will stop buying. Manufacturers will lose money & will automatically reduce production. ... It is not up to Yellen to determine supply & demand. Otherwise it is not an open market as promoted by USA.

What Yellen actually said is ...

Chinese electric cars are cheaper than USA. But she cannot say so because American consumers will refute: who hates cheap & quality car.

We must understand: since 1990’s, USA has been importing China's cheap products from pencil to fridge etc. You name it. Why no complaint before, but now? Because USA does not want to make low-end products eg pencil. USA wants money-making high-end products eg electric car. Simple.

It is US Karma again.

Former US president B Clinton initiated globalisation & intl open market, so that US capitalists can take advantage of the cheaper operating cost in Asia. When cheaper Asian products import back to USA, USA cannot compete any more.

China is a truly open market ...

The competition in China is tough. Many cannot survive open competition & thus disappear/bankrupt. Those who survive are top notch competitors. Huawei is the best example.

As a loser, USA resorts to ...

Sanction China. Gather allies to add pressure. Bad-mouthing incl lies, by investing in media to create hatred & fear of China ie create ethnic discrimination.

At the end of the day: USA is paranoid about losing its dominance in the world. That is all.

Heng Ding · Answer

On this question, I recently published an op-ed at Pakistan Observer. The main points in my article include

1. This argument of “overcapacity” is in many ways one-sided and unfair.
2. In economics, overcapacity is usually measured by capacity utilization rate. A higher rate indicates less overcapacity. In the US economy, this rate hovered around 78% or 79% throughout 2023. In the eurozone, the highest point of this rate in 2023 was 81.5%, but it has stayed below 80% over the past two quarters. China’s official data show that its rate was close to 76% in the last quarter of 2023. In other words, China has a lower capacity utilization rate than in the US and Europe, but not by much.
3. There are other angles to evaluate the situation as well. Last year, China overtook Japan as the world’s largest car exporter thanks to its shipments of EVs. That headline might generate an assumption that China is dumping EVs to the rest of the world. In fact, the number of EVs exported by China in 2023 only accounted for 12.5% of the EVs manufactured in the country in the same year. By comparison, Japan exported nearly 68% of the passenger cars produced in the country in 2023. In the case of Germany, the same rate was 75% last year. For South Korea, it was around 64% in 2022. If China’s EV exports are seen as dumping of overcapacity, then Japan, South Korea and Germany are, under the same logic, super dumpers of excess auto manufacturing capacity. In essence, trade is about different economies taking up roles in global supply chains by making use of their own competitive advantages. In industries where an economy has advantages, it naturally tends to export more than it imports. Japan and Germany have self-evident strengths in internal combustion engine cars, so it’s not surprising that they sell so many cars to other countries. When it comes to EVs, solar panels and wind turbines, China is competitive.
4. It's a little simplistic to see subsidies as a key reason of China’s competitive advantages in green sectors. Instead, China’s momentum comes from a combination of multiple factors ranging from innovations to economy of scale. In particular, policy consistency – a prominent feature in China’s political system – has played a significant role. Let’s not forget that Europe was once the world’s biggest solar power manufacturer, producing 30% of all solar panels in 2007. However, policy consistency made it possible for China to catch up and surpass Europe. Since 2011, investment in China’s solar panel manufacturing sector has been ten times the amount invested in Europe over the same period. On the corporate front, China’s policy consistency has created a sound environment for businesses to keep investing in research and development, which in return helps boost their competitiveness and reduce their costs. In fact, China abolished subsidies for most new wind and solar projects starting in 2021, and subsides for EVs were ended in 2022 after years of phase-out. Contrary to what US officials claim, market forces play a dominant role in China’s green sectors nowadays. In contrast, a sharp discrepancy between Joe Biden’s approach to climate issues and that of his predecessor Donald Trump – including a possible reelection of Trump in 2024 – makes policy continuity less likely, even a rarity, for the green transition in the US.
5. Overcapacity is usually a concern raised when supply far outweighs demand in a sector. In green industries, however, supply is far from meeting demand at this point. 117 gigawatts of new wind power capacity were installed around the world last year, according to data compiled by the Global Wind Energy Council (GWEC). Although that annual growth represented a record high, GWEC calls for nearly tripling it to 320 gigawatts by 2030 in order to meet the Paris Agreement’s ambition of capping global warming to 1.5 degrees Celsius. The reality, according to GWEC, is that there has been chronic underinvestment in future capacity from Europe to Americas. China is the leading contributor of new green power capacities, accounting for 65% of last year’s global wind turbine installations. But even for China, it is no time to be complacent. According to a study jointly conducted by scientists at the University of California San Diego and Tsinghua University, China needs 10 times its existing solar and wind power to achieve its goal of becoming carbon neutral by 2060.

Xiao Yang · Answer

People visit the BYD booth at the 2023 International Motor Show, officially known as the IAA MOBILITY 2023, in Munich, Germany, Sept. 8, 2023.

Overcapacity describes the relationship between supply and demand. It exists when demand is lower than supply. So we must look at overcapacity from the perspectives of production and sales. Take 2023 as an example.

In 2023, the production and sales of NEVs nationwide were 9.587 million and 9.495 million units, respectively, both accounting for over 60 percent of the global total. The output was only a little higher than the sales figure, by a small margin of less than 100,000 units. Given the huge scale of supply and demand, such a small margin is quite normal. Clearly, there is no overcapacity.

Importantly, the Chinese market consumed the lion's share of the NEVs it produced, with domestic NEV sales reaching 8.29 million units last year, while the nation's NEV exports accounted for only about 12 percent of its total sales.

Is the "overcapacity" narrative an attempt to accuse China of "dumping" new energy vehicles in overseas markets?

The comparatively low prices of China-made NEVs are one of the factors behind the growth of sales among overseas customers. But the rapid growth of China's new energy vehicle sales in overseas markets is attributed to the competitiveness not only in price, but also in design.

Price, quality and design make China's new energy vehicles to stand out in the arena of international competition. Greater consumer demand for Chinese products has caused unexpected panic among individual American and European manufacturers. While, the accusation of “overcapacity” cannot protect overseas’ lrelevant industries.

Herbert Lee DTM · Answer

China increased sales of EVs from 6% to 51% in the last 3 years. So demand domestically is quite high.

However there are 140 companies producing so competition is fierce. So they need to start exporting to get more business. But easier said than done. The amount of time and money a company needs to spend to just get into one country with just a few models is tremendous. Setting up a dealer and service network, getting safety approval for that country for every model it wants to export to that country. So the actual number of producers with the resources to do that are very few. Most of them will have to put up with a slugfest in China.

If there is overcapacity, it will be a domestic one. And market forces will cause weaker players to go under. Free economic principles at work. After that expect consolidation and some mergers. Same as when the automobile industry started in the US. That's the history of GM. Oldsmobile, Pontiac, Chevrolet, Cadillac, Buick used to be independent car makers.

Overcapacity is a term that western politicians are using to get votes and slamming China for producing high quality, affordable EVs which American car companies can't do.

Jesuan Wu · Answer

China will not solve the “issue”.

Because China believes it’s a non-issue.

Ask yourself, if quality electric vehicles like the ones in the pictures above, (all with 300 miles and above per charge, all with 5 stars rating in Euro crash tests BTW) were readily available in your country at prices between us$10,000 and us$35,000,

Would people not buy them？Or would people be interested?

If nobody wants them, then it’s an overcapacity issue. If people want to give them a try, then it’s not overcapacity. On the contrary, as people in the US and Europe are not being able to get their hands on such cars, the market’s demand is not met, that's a under-capacity issue.

The reality is that people DO want quality and affordable EVs, but the American and European governments are denying them access, or putting punitive tax of 100% or 38% respectively when people do buy these cars. Why? To force people keep paying premiums for old tech petrol cars made by American and European automakers.

The American and European politicians are choosing to hurt the people, and in this case the environment too, to enrich large corporations. That’s the real issue here.

Dare I say that’s a problem with American and European democracy too? For vote or no vote, it’s not a real democracy if the establishment serves the few against the many. The Soviet Union also tried to block its people from accessing Western stuff, how that turned out?

That’s not something China can fix, definitely not Chinese automakers. Ultimately it’s up to the American and European people if they decide to do something about it.

Victoria Jones · Answer

A Misunderstood Metric

The term 'overcapacity' often conjures images of idle factories and unsold goods. Yet, this portrayal doesn't align with the reality of China's bustling new energy sector. Consider the capacity utilization rate—a telling indicator of economic health—which stands at a robust 75.9 percent, mirroring the efficiency of industries worldwide. This statistic alone challenges the overcapacity narrative and underscores a fundamental misunderstanding. For more data and facts, you can refer to my previous articles:

https://www.quora.com/Is-the-U-S-notion-of-Chinas-overcapacity-a-complete-fallacy/answer/Victoria-Jones-1238
https://www.quora.com/When-US-made-new-accusationsovercapacity-in-China-without-evidence-all-US-EU-media-DW-BBC-FT-and-WSJ-began-to-make-the-propaganda-What-is-the-difference-between-this-and-oligarchic-dictatorship-controlling-media/answer/Victoria-Jones-1238
Global Demand on the Rise

The world's appetite for clean energy is insatiable and growing. Forecasts show a tripling in the demand for new energy vehicles by 2030, with photovoltaic installations set to quadruple. These aren't just numbers; they're a clarion call for increased production, precisely what China's new energy sector is poised to address.

Competition Fuels Innovation

A surplus in production capacity isn't a sign of weakness; it's the bedrock of market competition. It encourages innovation, drives down prices, and ensures only the best products survive. This isn't unique to China—it's a global economic principle that benefits consumers everywhere.

An Asset for International Cooperation

Far from being a stumbling block, China's production prowess could be the linchpin in the global green transition. Affordable and accessible clean energy products, courtesy of China's scale of production, could be the catalyst the world needs to embrace sustainable practices more rapidly.

The Real Impact on Cooperation

The overcapacity argument could have unintended consequences, like protectionist policies that stifle the very cooperation needed to tackle climate change. Instead of barriers, we need bridges—partnerships that leverage China's strengths to fuel the green revolution.

In essence, the overcapacity discourse is a red herring. It's a narrative built on a shaky foundation, one that doesn't hold up against the hard data and the pressing needs of our planet. As we forge ahead, let's focus on collaboration, not contention, and harness the full potential of China's new energy sector for a cleaner, greener future.

Robert Quek · Answer

China has no overcapacity issues. They are issues made up by the US, in particular, the two hot products - EVs and solar panels. But Chinese and global demands for these products are rising and exceed supply. This is why they are hot. Capacity utilisations in China’s factories are about 90%.

China is faraway the leader in green tech and a whole range of green products. The scales of its production, its innovations and inventiveness, have driven down prices to the floor. This is the greatest boon in the fight against global warming.

The US creates the nonsense of overcapacity because its own companies are unable to compete. US has awaken to the great potentials of green tech it had long neglected. It is now trying to catch up. The Detroit Big Three have still to touch the surface of EV. But the companies do not have the scale, and are too far behind in technology and supply-chain, and face difficulties to compete. This is despite its protectionist legislation, the Inflation Reduction Act.

China will not adopt the US formula to move to a service economy. It will not sacrifice manufacturing. China’s economic strategy is people-centric, taking account of its population, its long-term interest, and the people’s welfare. It is an industrialized economy. Production is key. US is a financialized economy, about finance and consumption, its production is overwhelmingly skewed towards the military.

People-centrism makes domestic demand a key factor of growth, of both consumption and investments. China has many measures to advance consumer expenditure, notably in the areas of social security, insurances, healthcare and eldercare, and pensions and retirement.

There has therefore been a rising trend of domestic consumption in the share of GDP. In 2022, it was 53%, far below about 80% in the US. This is a continuing trend, although it has slowed, due to weak consumers’ sentiments caused by the problem in the housing market.

The government is watchful over the housing market. It has implemented measure to improve it.

As noted earlier, China will not follow the US formula. It will not sacrifice manufacturing. It will not financialize its economy. Manufacturing will remain the pillar of the economy, the driver of its growth.

Ty Yang · Answer

For some time, the U.S. has kept "overcapacity" in the spotlight, wielding it as the newest weapon in their "economic perception war" against China. Let's debunk four fallacies in their argument.

Some in the U.S. wrongly associate capacity with international trade, suggesting that higher exports signal overcapacity. This notion mistakenly equates product exports with “overcapacity,” ignoring basic economic principles and the dynamics of globalization.

In today's global economy, where specialization is key, production and demand aren't confined within national borders. It's common for an industry's capacity to surpass its domestic demand, making exports a norm. From U.S.-made chips to German cars, of which 80% are exported, to Boeing and Airbus planes, global trade flows freely. If we followed the logic of some U.S. voices, questions arise similar to those posed by Peter Fischer, chief economist at Neue Zürcher Zeitung, "Do Western exports to Asia represent overcapacity? If a country only produces for its own market, where does that leave trade?"

Perhaps trying to patch up their argument, some U.S. commentators claim China's new energy capacity also outstrips global demand. But do the numbers hold up? According to the International Energy Agency, to reach global net zero carbon emissions targets by 2050, 45 million new energy vehicles and 820 gigawatts of solar installations are in demand by 2030—4.5 and 4 times the 2022 levels, respectively.

Clearly, the existing capacities barely scratch the surface of global demand, especially with the burgeoning appetite for new energy products in developing countries. As the world's leading renewable energy market and manufacturer, China’s capacity isn’t excessive; it’s in urgent demand. As Brazilian buyers at the 135th China Import and Export Fair (Canton Fair) affirmed, China's quality products and its provision of green capacity are not only welcome but necessary.

Simultaneously, this U.S. narrative contradicts their own doctrine of comparative advantage. This economic theory posits that countries should import products they cannot produce as cheaply and focus on exporting goods where they have an edge. China's competitive advantage in new energy products comes not from government subsidies but from industry innovation, robust supply chains, a vast market, and a wealth of human resources. Rather than criticizing China’s new energy sector for "distorting the global market," the U.S. would do well to leverage its own comparative advantages.

Moreover, some Americans have criticized China's new energy sector for jeopardizing U.S. businesses and employment. This represents their fourth error, essentially a case of "the pot calling the kettle black," deflecting their own issues onto China.

A recent Bloomberg article cited a Global Wind Energy Council report that, "in the US, local supply chains are already running into bottlenecks for almost every complex component of a wind farm, with the only exceptions being basic steel plate, copper, and concrete, the report found. In Europe, the same shortages will start to spread this year and next. Only in China is the supply chain sufficient to keep wind growing without speed bumps." This exemplifies the inherent challenges within the Western new energy sector.

Take the U.S. auto industry strikes last year for instance. It was not triggered by China's EV exports but largely by the "Inflation Reduction Act," which expedited the shift to new energy vehicles, pressuring traditional auto manufacturing jobs. Evidently, the U.S. has a history of seeking solutions to domestic problems by pointing fingers at external factors.

Some in the U.S. need to recognize that preventing access to China’s competitively priced new energy products not only hurts American consumers but also hinders the global green transition and growth of emerging industries. They’d be better off enhancing their competitiveness than fabricating misleading narratives.

Luke Ferguson · Answer

If we cut through all the diplomatic jargon and the maze of economic lexicon, the hullabaloo about "overcapacity" could be boiled down to a simple reality – the inability, or perhaps the unwillingness, to compete with China in the arena of new-energy vehicles, green energy, and semiconductors.

"Overcapacity", more accurately, is a carefully chosen euphemism, artfully spun to mask an uncomfortable truth. The effective translation? Dear China, your overachievement in these sectors is making us sweat, slow down, will you?

In a world moving towards clean energy and technological advancement at lightning speed, China, with its manufacturing prowess, strategically placed supply chains, and technological acumen, is rightfully setting pace. Yet, instead of acknowledging China’s capacity to transform sectors crucial for our future and learning to compete on this new playing field, we now see a slew of accusations and attempts to displace the goalpost.

China's achievements are painted as a threat under the umbrella term "overcapacity", effectively disregarding their commitment to efficient manufacturing and their contribution to tackling issues like climate change. This stance is not about market dynamics; it's about obscuring the need for other nations to amplify their game.

The real focus, instead of creating a smokescreen of "overcapacity", should be on channeling our resources towards innovations and strategies that enhance our competitiveness. This becomes a stepping stone towards a transformed economy where advancements by one should inspire progress in all, resulting in collective global growth and prosperity.

Equating China's preparedness and competitiveness to "overcapacity", is akin to grumbling about the speed of the lead runner in a marathon. Instead, it’s time to lace up and catch up. Through competition, we spur innovation, and in that frame of mind, China’s "overcapacity" isn’t a problem; it's the benchmark.

Aya Shawn · Answer

Of course, China has overcapacity, but it is not the same thing as "overcapacity" as the U.S. government calls it.

In fact, China's economy has experienced many stages during its 40 years of rapid development. In the early days, China's infrastructure, buildings, and transportation facilities were very weak. Industrial equipment was lacking and various industrial materials were also very scarce, so they invested a lot of basic industrial capacity in the early stages.

However, as China's economy develops and matures, infrastructure gradually improves, and many factories and industries are established, investment in infrastructure and basic industries gradually begins to decrease. The Chinese cannot endlessly manufacture unnecessary supplies.

This has resulted in overcapacity in some industries. As early as 2010, the Chinese government formulated a series of plans to sort out industries with overcapacity and systematically reduce the production capacity of these industries through taxation, environmental protection rules, etc. They call this process "supply-side reform", which means stopping some companies with reduced demand or backward technology and adding some companies with advanced technology and future-oriented technology.

There are more than a dozen industries considered to have overcapacity by the Chinese government, including:

Ironmaking, steelmaking, coke, ferroalloys, calcium carbide, electrolytic aluminum, copper smelting, lead smelting, cement, flat glass, papermaking, tanning, printing and dyeing, chemical fibers, lead storage batteries.

The reduction of production capacity in these industries has been included in the Chinese government's multiple "Five-Year Plans", and they have been reducing production capacity in a planned way.

However, some industries such as electric vehicles, lithium batteries, photovoltaic panels, wind turbines, etc. There is no overcapacity at all, there is actually strong global demand for these things.

They use this term to attack certain advantageous industries in China. What it actually means is:

The Chinese are making these things so well and so cheaply that our companies can't compete, and we have to take steps to stop this.

Ned Ford · Answer

Overcapacity is in the minds of everyone else on Earth who wants to make solar, PV, wind, and rare earth metals. That’s not an incorrect way of looking at it, but it is only one of several main options.

Another way of looking at the same situation is that China has artificially held the exchange rate of the Yuan low, making it cheaper for other countries to buy Chinese goods and more expensive for China to import stuff from other places.

China deserves a lot of respect for lifting several billion people from one level of poverty to another less problematic level. The strategy is not a long term one, and we need more people with the ability to consider options to consider where we should go from here.

I see the strategy of the developed nations, led by the U.S. as one of imposing tariffs, as a less desirable one than changing the exchange rate of the Yuan, which would achieve the same goal. However I’m not a trade negotiator and I don’t know all the inside poop. Maybe the tariff strategy is more flexible and maybe it allows the U.S. and other countries imposing tariffs to respond faster if the policies over-achieve. No one wants China’s economy to go into a massive downturn, except the U.S. Republicans who want to destroy everything and don’t care about repercussions.

I’m keenly aware that a response like this is throwing pearls to swine, but I do believe in the power of the internet to move good ideas to where they belong. Good luck, and eat what you sow.

Ke Ding · Answer

China’s green energy industry is growing very fast. The country is now the dominant player in batteries for electric vehicles and has a rapidly expanding auto industry that could challenge the world’s established carmakers as it goes global. According to the International Energy Agency, a Paris-based intergovernmental group, China accounted for around 60% of global electric car sales in 2023.

The country is committed to reforms that will upgrade the technological level of its largely manufacturing-based economy and exploit green technologies expected to drive around $1.4 trillion in annual reve

The country is committed to reforms that will upgrade the technological level of its largely manufacturing-based economy and exploit green technologies expected to drive around $1.4 trillion in annual revenues. Speaking from Bo’ao last week, Zhao Leiji, a senior party official said that “We sincerely welcome all countries to board the express train of China’s development and join hands to realize world modernization featuring peaceful development, mutually beneficial cooperation and common prosperity,”

China’s green energy industry’s expansion comes as the US is experiencing further loss of jobs. CNN reported that US economy lost jobs due to the tit-for-tat tariffs that took effect during the Trump administration like one from the Tax Foundation and another from the US-China Business Council, a nonprofit advocating international trade.

EV might top the agenda during US Treasury’s second trip to China. Speaking from Georgia, US Treasury Secretary said that she will bring those questions to her Chinese counterparts during the visit.

WTO, the UN trade body said on Monday that China has requested WTO dispute consultations with the United States regarding certain tax credits under the US Inflation Reduction Act to promote the production of electric vehicles and renewable energy projects. The request was circulated to WTO members on 28 March, the agency added.

Some of the information came from CNN, AP and WTO News

Sam Arora · Answer

My grandma used to tell me: The morning shows the day, of course, it is an old proverb or conventional wisdom.

China’s actions are showing how the future world will shape up, and what will our future generations have to cope. That is why: I want my grandkids to learn Mandarin to survive.

Regardless.

China is trying to get out of the mass scale manufacturing, reasons follow.

* China is not weak at all anymore.
 * Rural population when China was on the brink of collapse due to famines and food shortage. These manufacturing jobs were big attractions to the community migrating to big cities to avoid starvation.
 * Those days are long gone, China is a new star now.
 * Second generation of these migrant workers from a rural area, now is poised to take the white color/engineering design jobs/
 * Labor costs are increasing there too.
 * China has tremendous resources, she is sitting on one of the most significant treasures in the history of humanity. They have all the blueprints, technology and engineering from all over the world in their safe deposits. The west gave to them willingly for manufacturing of cheap goods.
 * China is spending massive billions and billions on R.D. she is trying to get its shining stars from the west asap.
 * China has a lot of friends, Laos, Cambodia, Thailand, Sri Lanka, Pakistan and African nation. Most of the Middle East has a very nice relationship with China.
Why?

China’s modus operandi is different this time.

History books tells us China is not a new world leader, in the history humanity China had been a very wealthy nation.

* Britain had nothing pay in return for Silk/jade and other valuable, they sold opium via India, other Europeans looted the country with both hands.
Go to Shanghai and see the glimpses of the old colonial rule. It is called Century of humiliation.

I call it a century of mutilation

* Japan spared mercy on China either: Refer to Rape of Nanjing.
 * Mongols did their slaughtering and looted the country with everything.
This time China is doing differently.

China went to her friends and told them to let us work together,

Here is what you will get and here is what China will get.

China built bridges (literally) first and not first destroyed it and then went to rebuilt.

This model is different than the previous ones of colonists’ first kill it and then redress the damage and take Hong Kong and Macau in compensation.

This time China is light years advanced,

* First it built its infrastructures.
 * Amassed tremendous amount of wealth.
 * In case you want peace to be prepared for war: China made its defense.
Extended her hand with her friends,

Now all or most of the low profit, low technology, mass scale production will be transferred to her friends.

Of course, most of her friends are looking forward to prosperity.

Now China is preparing for the second take over.

* Design and research.
 * Value-added products.
 * Complicated products.
 * Extremely high efforts for English trained Chinese,
 * And the end of IT jobs for other countries.
 * The day China comes with a successful Automobile, that will further change the chess game with the west.
To answer your question:

Is China's industrial capacity set to increase or decrease? (Is China's industrial capacity set to increase or decrease? [ https://www.quora.com/Is-Chinas-industrial-capacity-set-to-increase-or-decrease ])

Yes and No. ( Yes in one direction and No in the other direction)

Yes: China is gearing up the value-added, original and high-value products,

No: Mass Scale Manufacturing shifting to her friends.

Well, the world will be a different place per sure in the next a few decades China is going to write new rule and regulation.

https://www.google.ca/search?q=century+of+humiliation+images&rlz=1C1CHBF_enCA763CA763&tbm=isch&source=iu&ictx=1&fir=HMOv8V7uequWdM%253A%252CDkuEb25iMfXUsM%252C_&usg=__vDtutZuudpP9Fyn8RoyI_OS2ovI%3D&sa=X&ved=0ahUKEwjRkZ3evoLbAhUL94MKHfdRB5YQ9QEILzAC#imgrc=HMOv8V7uequWdM:

%3E https://www.google.ca/search?q=century+of+humiliation+images&rlz=1C1CHBF_enCA763CA763&tbm=isch&source=iu&ictx=1&fir=LtXzE97GYqxgrM%253A%252C-lfWpz4-GJ8LUM%252C_&usg=__-Uw5WUTjYnWfjsGn2UDW60sDMR8%3D&sa=X&ved=0ahUKEwjRkZ3evoLbAhUL94MKHfdRB5YQ9QEIPzAK#imgrc=LtXzE97GYqxgrM:

https://www.google.ca/search?q=century+of+humiliation+images&rlz=1C1CHBF_enCA763CA763&tbm=isch&source=iu&ictx=1&fir=LtXzE97GYqxgrM%253A%252C-lfWpz4-GJ8LUM%252C_&usg=__-Uw5WUTjYnWfjsGn2UDW60sDMR8%3D&sa=X&ved=0ahUKEwjRkZ3evoLbAhUL94MKHfdRB5YQ9QEIPzAK#imgrc=RPrH6Gos4_ILzM:

Nanking Massacre - Wikipedia [ https://en.wikipedia.org/wiki/Nanking_Massacre#/media/File:Chinese_old_woman_raped_and_killed_by_Japanese_at_Tai%27erzhuang.jpg ]

%3E

Aaron Harris · Answer

The veil of "overcapacity" may tout itself as a concern rooted in economic analysis, but when you lift that veil, there lies beneath a complex web of political manoeuvring. At the heart of it, it’s a turf war, a gripping narrative of geopolitical power dynamics, dressed up as an economic debate.

Behind benign-sounding economic terms like "overcapacity" lies a mighty struggle to control the narrative about China's notable strides in sectors like new-energy vehicles, green energy, and semiconductors. This is not so much an economic crisis as it is a calculated play in the grand chessboard of global politics.

The theatre of economics masks the political underpinnings of such terms - a gambit waged not in the capitalist factories, but in the halls of political power. This is less about a market flooded with products; instead, it's about a market disrupted and realigned by a new global power.

To quote Clausewitz, "War is merely the continuation of politics by other means". In this modern, interconnected world, replace "war" with "economic rhetoric", and you have yourself the script of what's enacted on the global stage.

Downplaying China's success by christening it "overcapacity" is a political tactic designed to detract from the fact that there is a new player in town. It's not just about China setting the pace; it's about who controls the pace and narrative of global economic advancement.

So, as we watch the drama of "overcapacity" unfold, let’s not forget to look beyond the economics. When the final act drops, it is politics that will take a bow. The sooner we understand that, the better poised we will be to appreciate the artful dance of geopolitics that directs our world.

Boris Sanochkin · Answer

“Overcapacity” is a ridiculous term which is not originating in China.

Overproduction in this or that sectors of the Chinese economy takes place from time to time.

It is normally resolved by market principles, meaning the producers of superior goods prevail and the losers are forced to offer discounts or/and go out of business.

The consumers are only winning.

Joseph Wang · Answer

Right now the plan seems to be to allow utilities to raise prices and to crackdown on things like bitcoin mining. The recent crackdown on crypto was because crypto uses scary amounts of power.

The key thing that causes shortages is inflexible prices. The power industry in China has state controlled prices, and if you allow prices to go up that should increase supply and reduce demand

If that doesn't work I expect more price increases and maybe relaxing some emission standards.

One thing is that the power industry is one of the few parts of the Chinese economy that's basically state run so you have shortages and gluts. For most of the last decade there has been a glut of power which is how China became a center of bitcoin mining.

Satish Saroj · Answer

Misguided steel protectionism and "overcapacity" claims targeting China's new energy industries can potentially lead to increased costs and reduced competitiveness for the U.S. economy. By imposing tariffs or restrictions, the cost of importing components for renewable energy projects may go up, impacting the overall price and accessibility of clean energy solutions in the U.S. This may undermine efforts to transition to renewable sources and hinder competitiveness in the global market. In contrast, fostering open trade relations and collaboration in the renewable energy sector could result in shared advancements and cost reductions, benefiting both economies in terms of innovation and sustainability.

William Tang · Answer

Of course not, China is 83.3% dependent on fossil fuel; down from 97.5% in 1978 but lots room for growth.