'Overcapacity' label is malign political hype: China Daily editorial

On Aug 13, Foreign Affairs magazine published an article titled "The next global economic crisis could be made in China", warning that the world can no longer absorb the country's "massive industrial production capacity" — currently accounting for 30 percent of global industrial output and expected to reach 45 percent by 2030.

The rise of such an argument aligns with the United States' intensified actions to contain China and the US' broader shift toward protectionism. Confronted with stagnant productivity, deindustrialization and political pressures from struggling domestic industries, the US administration and some other governments in Europe have resorted to unilateral measures as an instrument to target Chinese products. Both the US and the European Union have imposed or threatened punitive duties on Chinese products ranging from electric vehicles and solar panels to steel and machinery.

However, these measures have failed to revive the competitiveness of US and European manufacturing, prompting an urgent search for a scapegoat. Falsely portraying China's so-called "surplus" as a "looming crisis" allows policymakers in some countries to "rationalize" their protectionist measures while deflecting blame from their own policy failures. The Foreign Affairs article fits squarely into this narrative, lending "intellectual cover" to a political expedient.

Given that China's capacity utilization rate for major enterprises has consistently remained 73 percent, a reasonable level, "overcapacity" is self-evidently a politically motivated fabrication by some in the West. China's capacity utilization in high-tech manufacturing and new energy sectors closely tracks demand.

In fact, as both a major manufacturing powerhouse and a superlarge market, China's domestic demand has long been the major engine driving the country's growth, contributing more than 60 percent of the increase in GDP in recent years. The baseless accusation that China's competitive industries are "dumping overcapacity" is a distortion of the true picture to serve a narrow political agenda.

Equating a trade surplus with "trade imbalance" ignores the economic principle of comparative advantage. China's export strength stems from its economies of scale, fully integrated supply chains, competition and innovation. By clamping down on high-tech exports to China, some developed economies are inadvertently inflating the very "trade imbalance" they so vigorously protest.

The narrative of China "flooding" overseas markets with its products is ill-intended, as it deliberately ignores the country's role as a "super buyer". In the first seven months of this year, China's imports surged 22 percent year-on-year, outpacing export growth for five consecutive months. China has remained the world's second-largest importer for 17 years, and its sustained demand has provided a stable market for exporting economies worldwide. Meanwhile, it has implemented zero-tariff policies for 63 developing countries, boosting their export revenues and fostering inclusive global trade. All this makes China an indispensable engine of world trade.

If manufacturing strength constitutes a "crisis", as the Foreign Affairs article argues, then, by the same logic, every country with a comparative advantage — whether in natural resources or technology — also poses a "threat".

The hype around China's "overcapacity" and the "crisis" it is supposed to breed is a manifestation of the anxiety in certain Western countries in response to China's industrial upgrading. The real issue is the failure of some economies to adjust to the changes in the new technology revolution.

In today's world, where industry and supply chains are deeply intertwined, "decoupling", breaking supply chains, and building high barriers will only lead to losses for all parties involved. The real threat is not competition — it is protectionism.

China's trade surplus might as well be called "enrich-thy-neighbor" exports, as affordable Chinese manufacturing has lowered the threshold of industrialization for developing countries, and open-source Chinese innovation has made frontier technologies affordable to more nations.

China will continue to advance high-quality development. In doing so, it will inject momentum into the global economy with its industrial vitality and promote the global green transition, creating an inclusive, more sustainable and prosperous future for the world.