Debunking the 'China Overcapacity' Myth

   

Busting the myth of China's “overcapacity” and why it is not a problem for everyone

Context is key. 

China's innovativeness and dilligence has meant that the country is producing more and more, leading to cheaper goods on the market. 

This is good for both developing and developed countries.

Debunking China’s overcapacity myth

Data shows China’s exports are more economic miracle than deflation-driven devilry

By DAVID P GOLDMANMAY 6, 2024

Asia Times

Debunking China's overcapacity myth - Asia Times

During the past four years, China shifted the preponderance of its exports to the Global South away from developed markets, and at the same time built production facilities across the Global South that re-export to developed markets—circumventing America’s 25% tariff on most Chinese goods and other developed-market trade barriers.

There must be some devilry behind China’s export achievement, according to the dark murmurings of Western economists: China is in deflation, so it’s selling goods on the cheap.

“Foreign officials worry about a repeat of the China shock of the early 2000s, when pro-market reforms in China and its entry into the World Trade Organization fueled an export boom that was a boon for consumers but crushed competing industries in the US and elsewhere,” warned the Wall Street Journal on May 4.

Asia Times

13 hours ago

China tariffs won't make America great again - Asia Times

Here's a reference on what Janet Yellen stated:

CHINA’S OVERCAPACITY AND UNFAIR TRADE PRACTICES

Finally, we’ll be focused here on China’s industrial overcapacity. 

• As I’ve communicated directly to my Chinese counterparts, China’s macroeconomic imbalances are being aggravated by Chinese direct and indirect government support to the manufacturing sector. 
• This is currently leading to production in some industries that significantly exceeds not only China’s domestic demand but also what the global market can bear. 
• Without a new policy direction, including to lift Chinese demand instead of just boosting supply, this can lead to large volumes of exports at depressed prices. 

This is not a bilateral issue between the U.S. and China. 

• German Chancellor Scholz raised this issue in his April trip to China, and 
• Macron and President von der Leyen emphasized the need for balanced trade relations with China earlier this month. 
• The G7 has collectively recognized the need to protect our workers and businesses from unfair practices. 
• And overcapacity threatens the viability of firms around the world, including in emerging markets. I believe it also poses a challenge to China’s growth.

President Biden has made clear that he will take action to stand up for American workers and companies, and last week the United States announced strategic and targeted steps in key sectors to respond to unfair trade practices by the PRC as a result of the Section 301 review. 

The EU and other countries are already using their authorities to investigate and consider remedies to China’s actions with regard to electric vehicles, and many emerging market countries have launched anti-dumping investigations in a range of sectors.

• This week will be a key opportunity to discuss how China’s macroeconomic imbalances and industrial overcapacity can affect our economies. 
• We’ll also discuss our responses and the approaches that we’re taking to raise these concerns directly with China.
• It’s critical that we and the growing numbers of countries who have identified this as a concern present a clear and united front.