Trade surplus no proof of overcapacity, economist says

A trade surplus should not be equated with overcapacity, Luo Zhiheng, chief economist at Yuekai Securities, said, stressing that countries' comparative advantages underpin international trade.

In a recent exclusive interview with China Daily, Luo said supply and demand cannot be perfectly matched everywhere at all times. Some countries produce more than they need, while others need more than they produce, creating the basis for trade and specialization.

"Some countries are better at making cars; others at making clothes and shoes," he said.

Those differences alone do not justify claims of overcapacity, Luo said. Such specialization allows countries to draw on their comparative advantages to meet one another's needs.

Taking China's trade with Europe as an example, Luo said the surplus partly reflects China's rapid progress in the green transition. Its clean energy products are better able to meet Europe's development needs, he said.

Citing economist Adam Smith, Luo said the logic behind some overcapacity claims would ultimately require a return to a self-sufficient economy.

"That makes no sense," he said.

Zheng Zihang contributed to this story.