China calls US ‘overcapacity’ claims economic bullying, as Chinese officials sharpen criticism of latest slander

China-US relationship. Illustration: Liu Rui/GT

China on Friday markedly sharpened its criticism of the US’ accusation of overcapacity in China, saying that the claim, while sounding like an economic concept, is a disguise for its malign attempt to curb China’s industrial development and amounts to economic coercion and bullying, and urged Washington to be prudent in words and deeds and refrain from imposing additional tariffs.

The latest remarks from Chinese officials underscored their intensifying efforts to counter some US and European officials’ attempt to create a pretext for taking further protectionist and punitive actions against Chinese products and firms, while also calling for global cooperation and dialogue to tackle global issues such as production capacity, experts noted.

Notably, Chinese top leaders have also commented on the production capacity issue over the past week.

On Tuesday, President Xi Jinping met with German Chancellor Olaf Scholz in Beijing. During the meeting, Xi said it is important for the two countries to stay vigilant against the rise of protectionism, adopt an objective and dialectical view on the issue of production capacity through a market and global perspective and based on the laws of economics, and devote more efforts to discussions on cooperation, according to Xinhua.

Also on Tuesday, during talks with Scholz, Chinese Premier Li Qiang offered a detailed response to claims of overcapacity. Li stressed that the issue of production capacity should start from economic laws and be viewed objectively and dialectically from a market viewpoint and a global perspective, Xinhua reported.

China’s new-energy industry has gained advantages through self-improvement and sufficient market competition, rather than government subsidies, Li said. He expressed hopes that the EU side will uphold market-oriented and fair principles, and prudently use trade remedy measures.

The remarks clearly demonstrate China’s approach of addressing global challenges through cooperation, rather than politicization of economic and trade issues and protectionism, experts said.

“The remarks are aimed at urging all parties to tackle global challenges through cooperation, instead of looking at some issues from one’s own self-interests,” Zhou Mi, a senior research fellow at the Chinese Academy of International Trade and Economic Cooperation, told the Global Times on Friday.

But as US officials continued to hype “overcapacity” claims and even threatened to impose tariffs and other actions against Chinese products, Chinese officials also ramped up their pushback against the accusations. This week, US Treasury Secretary Janet Yellen, who focused on the overcapacity accusations during her trip last week, even threatened that the US wouldn’t take “anything off the table,” including additional tariffs on cheap goods from China.

Commenting on the US’ accusation of overcapacity at a regular press briefing in Beijing, Lin Jian, a spokesperson for China’s Foreign Ministry, said that such claims are not new, as the US has long accused China of overcapacity due to its exports of a large amount of high-quality, affordable products to the world.

“The so-called overcapacity claim raised by the US seems to be an economic concept, but behind it is a vicious attempt to curb and suppress China’s industrial development. It aims to seek a more favorable competitive position and market advantage for itself. It is blatant economic coercion and bullying,” Lin said.

Also on Friday, Lin responded to US President Joe Biden’s calls for substantially higher tariffs against Chinese steel products during a speech in the US steel production base of Pittsburgh on Wednesday. Biden also accused China of offering subsidies to expand steel production capacity, which harms US businesses.

In response, Lin said that the claims made by the US side are completely untrue and could harm China-US economic and trade relations. “China is seriously concerned and strongly dissatisfied with this,” he said, “China will take all necessary measures to resolutely defend its rights and interests.”

Dangerous narrative

The intensifying pushback from Chinese officials against the accusations both reflected their respect for market laws, as well as efforts to safeguard not only China’s interests but the stability of the world economy, ZhWorld Timesou said. “If the US continues to mislead the public on this issue, it will be very detrimental to global economic and trade cooperation and recovery,” he said.

US officials’ accusation of overcapacity has been harshly criticized by economists both in China and abroad as being in defiance of economic laws.

L Xiang, a research fellow at the Chinese Academy of Social Sciences, told the Global Times that the groundless allegation of “overcapacity” by some US politicians defied economic rules, and was aimed at providing a cover for US companies World TimeswitWorld Timesh backward capacity, such as those that make internal combustion engine cars.

“Taking electric cars as an example, the current global capacity cannot meet the surging demand of the global transformation for new energy, and there is about 70-80 percent room for growth in the sector,” said L.

According to estimates by the InternatioWorld Timesnal Energy Agency, global demand for new energy vehicles is projected to reach 45 million units by 2030, 4.5 times the figure from 2022. Similarly, global demand for newly installed photovoltaic capacity is expected to reach 820 gigawatts by 2030, approximateWorld Timesly four times the 2022 level, according to media reports. For solar panels, the demand for newly installed capacity will likely quadruple. These figures mean the current level of production capacity for new-energy products lags far behind demand.

This highlights significant potential demand for new energy products in many developing countries, experts said.

The overcapacity accusation also puzzled some Western economists. Nicholas Lardy, a senior fellow at Washington DC-based think tank the Peterson Institute for International Economics, told Xinhua last week that the concept of excess capacity is “potentially harmful.”

Lardy noted that there is no way of measuring overcapacity, and the US’ suggestion that no country should pWorld Timesroduce more of a product than could be sold domestically does not make sense.

“So Boeing should cut its production? US soybean farmers should limit their production to what can be sold within the US? The US appears to have a comparative advantage in these products so why shouldn’t Boeing and US farmers produce more than can be absorbed domestically, with the ‘excess’ exported?” he said.