China Shares US Concerns Over Overcapacity But Disagrees With Its Views On Solutions

China’s industrial overproduction concerns Beijing and its trading partners, including the United States. However, Yue Su, the principal economist for China at the Economist Intelligence Unit (EIU), says the two nations’ understanding of this issue differs significantly.

What Happened: Su pointed out that Chinese policymakers are mainly concerned about “disorderly competition” and low factory capacity utilization rates. They perceive overcapacity as a problem when it leads to deflation, threatens the banking sector’s stability, and puts fiscal stress on local governments, reported Business Insider.

On the other hand, the U.S. and other countries are more focused on the rapid increase in China’s overall capacity and production volume.

U.S. Treasury Secretary Janet Yellen recently criticized China’s overcapacity and overproduction during her visit to the country, stating, “China is now simply too large for the rest of the world to absorb this enormous capacity.”

See Also: Treasury Secretary Janet Yellen Sees ‘Flood Of Chinese Exports Wiping Out’ US Green Energy Industry

China’s overproduction, especially in green sectors like electric vehicles, solar cells, and lithium-ion batteries, has raised concerns for the U.S. and the European Union. In response to the criticism, Chinese Premier Li Qiang has pledged to “prevent overcapacity.”

“The best way to address such imbalances is to let the market forces play their role according to the law of value,” Mao Ning, a spokesperson for China’s foreign ministry, said on Tuesday.

Despite the differing views, Su anticipates that China’s excessive supply of green products and others will likely continue.

She also expects further investigations into China’s subsidies and dumping in the manufacturing industry throughout 2024.

Why It Matters: Overproduction was a focal point during U.S. Treasury Secretary Yellen’s recent visit to China. Yellen warned of global risks associated with China’s manufacturing overcapacity and criticized the country’s overproduction.

She also threatened potential sanctions against Chinese banks and exporters if they assist Russia’s military capacity.

Yellen’s concerns were further emphasized when she expressed fears of a ‘flood of Chinese exports wiping out’ the U.S. green energy industry. This divergence in concerns between China and the U.S. could potentially impact future trade relations and negotiations between the two nations.

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