Senior economist discusses China's 'overcapacity issue'

"It is a bit hard to see the evidence base for all the concerns about Chinese exports in terms of overcapacity," said a senior economist.

Albert Park, chief economist of the Asian Development Bank, made the remarks at a media conference on Wednesday, when addressing an inquiry from China Daily for his comments over the China-US dispute over the so-called overcapacity issue in China.

He said that the World Trade Organization (WTO) addresses non-competitive practices with anti-dumping and countervailing duties. It imposes anti-dumping duties when it believes some countries are unfairly dumping goods in export markets. The usual standard is that the export price is lower than the domestic price, or the export price is well below the production cost of a good.

Yet, he pointed out "we don't have a lot of strong evidence about whether that would apply to China".

When a country subsidizes its producers to export, countervailing duties are adopted to offset those subsidies. "Again, I think it's a bit hard to see the evidence base for all of the kind of concerns about Chinese exports in terms of overcapacity," Park said.

"We'll have to wait and see. Those arguments probably need to be adjudicated in the WTO or other formal context because they depend on many specifics about what's happening in the sector."

He also warned a trade war between the world's two largest economies is bad for the world, considering the negative spillovers.

"If it is an escalating trade war between the US and China, some countries may have greater export opportunities to either the US or China by replacing the bilateral trade. But I think these aggregate negative effects on global demand would (be) much bigger," he said.

"I think China and the US themselves will actually be able to handle trade sanctions in the sense that they both are large companies with many trading partners. And that's already been shown in China's response to the initial trade war initiated by Trump.

"My main concern is that other countries will be asked to somehow pick sides and usually it's those countries that would be hurt the most by a reduction in global trade."

liuzhihua@chinadaily.com.cn