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Overcapacity Claims a Factual Fallacy

Source: Science and Technology Daily | 2024-06-14 16:26:29 | Author: Tang Zhexiao

The Chinese aided Sakai photovoltaic power plant in Bangui, capital of the Central African Republic. (PHOTO: XINHUA)

By TANG Zhexiao

As China enjoys a boom in new energy and green manufactured goods, some countries have accused China of "overcapacity" in an attempt to distort the country's economic relations with the world and hamstring its development.

The so-called "overcapacity" is a fallacy and contrary to common sense, and is seriously inconsistent with objective facts. Those who think this way are trying to politicize economic and trade issues, and to impede global green transition with protectionism.

The Cambridge Dictionary describes "overcapacity" as "A situation in which an industry or a factory is producing more than it can sell." According to market principles, the balance of supply and demand is relative, and imbalance is the norm. That means overcapacity may occur in any economy that practices a market economy system. For example, Western countries have repeatedly encountered this problem in coal, steel, shale gas and other fields.

It is a common phenomenon globally that a nation's production capacity surpasses domestic demand. This "mirrors comparative advantages and results from [the] international division of labor and cooperation," according to He Hailin, an official with the Ministry of Industry and Information Technology.

Data from China's Ministry of Commerce shows that China's new energy vehicles (NEVs) exports of 1.2 million only account for 12.7 percent of its output, however about 80 percent of U.S.-produced chips are for export, and around 80 percent and 50 percent of the cars produced in Germany and Japan respectively are exported.

Why are Chinese NEV exports labeled as overcapacity, while in the same breath exports from developed countries are reasonable?

In fact, there is huge potential and shortage on the new energy demand rather than excess. The International Energy Agency (IEA) estimates that the global demand for NEVs will reach 45 million in 2030, 4.5 times that of 2022. And global demand for new PV installations will reach 820 GW, about four times that of 2022. Meanwhile, accelerating new energy technology and product upgrades and new models will continuously create new demand. The current production capacity is far from meeting market demand.

In the context of global green transition, the so-called "swamping the world market" with China's green production capacity is groundless.

"China possesses both the capability and responsibility to leverage its comparative advantages in the new energy industry, contributing Chinese technologies, products and solutions for the world," said Huo Fupeng, a National Development and Reform Commission official.

Since 2023, sales of Chinese NEVs in Nepal have repeatedly hit new heights, fully demonstrating the recognition of Chinese NEVs' technological innovation and driving quality by more and more Nepali consumers, said Chen Song, Chinese Ambassador to Nepal. Chinese brands such as BYD and Chang'an, have become the top choice for Nepali consumers when purchasing NEVs, said Chen.

Besides supporting the stability of the global industrial chain, China has been sharing advanced green technologies with the world.

For example, new energy has remained an important part of China-Africa cooperation. In recent years, China has built numbers of new energy generation plants in African countries, which puts them on a path of achieving clean energy sufficiency and green development.

One such initiative is the Chinese-developed De Aar Wind Farm in South Africa. The project has supplied 760 million kilowatt-hours of clean electricity annually for about 300,000 households, reducing nearly 62,000 tons of carbon emissions each year.

Facts show that neither exports nor supply chain reasoning are valid in the "overcapacity" claim. What is truly in excess is not China's new energy production capacity, but the attempts of those who resort to protectionism and suppress the development of other countries.

Editor: 汤哲枭

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