The discussion surrounding China's alleged overcapacity in the new energy vehicle (NEV) sector has gained significant traction among politicians and media outlets. Critics argue that China's excess production is exerting pressure on the global market, raising concerns about its impact on international trade and economic dynamics.
However, industry experts like Li Zhi, assistant dean at the China Institute of Development Planning, Tsinghua University, offer a different perspective. They assert that China's current NEV production capacity is not surpassing market demand. In fact, the potential for new energy products remains substantial, especially in many developing countries where demand is rapidly growing.
The purported overcapacity issue is often viewed through a narrow lens, ignoring the broader relationship between supply and demand. According to Li, true overcapacity arises when production outstrips demand, but this isn't the case for China's NEV industry. Instead, the real challenge lies in external factors such as restrictions imposed by the U.S. and Europe, which hinder the normal release of market demand. These restrictions create market distortions, making it appear as though there is overcapacity.
This scenario suggests that the so-called overcapacity is less about China's production capabilities and more about capacity competition influenced by geopolitical factors. The limitations placed by major economies are preventing the market from fully absorbing China's NEV production, thereby distorting the true state of supply and demand.
In essence, the debate over overcapacity is intertwined with broader economic and trade strategies, particularly the U.S.'s efforts to "encircle" China. This dynamic underscores the complexity of global market interactions and the importance of considering both production capabilities and external market barriers when evaluating industry capacity.
Reference(s):
cgtn.com
