The recent claims by U.S. Treasury Secretary Janet Yellen and German Chancellor Olaf Scholz suggest that China's clean energy products are in overcapacity, potentially flooding the global market and suppressing prices. But is this assertion accurate?
Official data paints a different picture. In the fourth quarter of 2023, China's industrial capacity utilization rate stood at 75.9%, closely mirroring the U.S. rate of 78.8%. Typically, an 80% utilization rate is considered healthy, indicating that both economies are operating near optimal capacity without significant overproduction.
When it comes to new energy vehicles (NEVs), China's production and export figures tell a nuanced story. In 2023, China exported 4.91 million vehicles, with 24.5% being NEVs. Total NEV production reached 9.587 million units, rivaling global leaders like Toyota and Volkswagen. Moreover, clean technology products such as EVs, solar panels, and lithium-ion batteries composed only about 4.5% of China's total exports, amounting to $1.06 trillion out of $3.35 trillion in 2023.
Chinese Premier Li emphasized during discussions in Beijing that a slightly higher production capacity fosters healthy market competition, benefiting consumers and driving innovation. Using Tesla's Shanghai gigafactory as an example, Premier Li highlighted how expanding production capacity has strengthened the competitiveness of Chinese EVs without relying solely on government subsidies.
From an economic standpoint, the principle of comparative advantage suggests that countries should produce goods where they are most efficient, fostering mutually beneficial trade relationships. This perspective aligns with global climate goals, as the world urgently needs more clean energy solutions to combat climate change.
Despite these facts, experts argue that the narrative of China's overcapacity is influenced by political and market competition factors. Brazilian scholar Marco Fernandes points out that while the U.S. and EU subsidize their industries, China is often singled out unfairly. This double standard undermines collaborative efforts needed to address global climate challenges.
In November, China and the U.S. agreed to triple global renewable energy capacity by 2030, underscoring the importance of international cooperation in achieving sustainable development. As the world moves towards decarbonization, the role of China's clean energy sector remains pivotal, challenging the notion of overcapacity and highlighting the need for unified action.
Reference(s):
Analysis: Does China really have excess clean energy products?
cgtn.com
