For some time, some western politicians and press have repeatedly hyped up so-called “Chinese overcapacity”. They claim that there is “overcapacity” in China’s new energy sector due to government subsidies and that China has exported “overcapacity” to other parts of the world.

Recently, the US announced steep tariffs on a range of Chinese imports, including electric vehicles and lithium batteries, to protect US economy from so-called China’s “unfair trade practices”. “Overcapacity” was also the stated reason behind the European Commission’s decision to launch an anti-subsidy probe into Chinese electric vehicles - the first in a series of similar investigations since last year. In fact, the “overcapacity” narrative goes against common sense and the facts. Essentially it is a pretext for the US and EU to implement protectionist measures.

First, there is no so-called “overcapacity” in China’s new energy sector. Whether there is overcapacity must be viewed objectively and comprehensively in the broad context of economic globalization, taking fully into account global supply and demand, as well as future development potential.

A country cannot be labeled with “overcapacity” simply because its production capacity is bigger than its domestic demand. Against the backdrop of economic globalization, both production and consumption are global. Countries engage in international division of labor and cooperation based on their comparative advantages and carry out international trade and investment to effectively improve global economic efficiency and well-being. This is a global consensus. The US and EU and other members of the developed world have been exporting large quantities of products to other countries. For instance, the US exports about 80 percent of its high-end chips, Germany exports about 80 percent of its automobiles, and a large portion of aircraft made by Boeing and Airbus are for export. If we look at China, it only exports 1.2 million electric vehicles, about 12.7 percent of its total output. How come the US and EU’s exports are reasonable while China’s new energy sector is accused of exporting “overcapacity”? Does it make any sense?

In terms of the global goal to tackle climate change, there is certainly no “overcapacity” in China’s new energy sector. Currently, the fast growing global new energy sector is still in its initial stage of development, with technologies keep updating. As the global green transition advances, there will be greater demand for new energy products. According to estimates by the International Energy Agency, to realize carbon neutrality, the world will need 45 million new energy vehicles by 2030, more than three times that of the global sales in 2023. The demand for photovoltaic installations will increase another 10 times, far exceeds the current global production capacity.

The US and EU are actually practicing protectionism under the pretext of “overcapacity”. If you want to deal with climate change, then you must say no to protectionism. If one resorts to protectionism, there will be no real solution to climate change. The restrictions imposed on the export of China’s new energy products will only weaken global coordination to address climate change.

Second, the competitive edge of China’s new energy sector is acquired through dedicated efforts and hard work, not government subsidies. The competitive edge comes from the comprehensive strengths including technological innovation, industrial and supply chains, and the market ecology.

Over the past 20 plus years, Chinese enterprises have kept investing in research and development and optimizing industrial layout in the new energy sector. Only a few of them have managed to survive and thrive from intensive market competition. Their products have been recognized in domestic and international markets. This is the result of market competition and cannot be easily achieved through subsidies. As many may notice, optimistic about BYD, Berkshire Hathaway Inc. has been investing in BYD since as early as 2008.

Industrial subsidies, originated from the US and Europe, have been widely adopted by many countries. China’s industrial subsidy policies are mainly for steering purposes, and have followed the principles of fairness, transparency and non-discrimination. All eligible enterprises operating in China can equally enjoy it. The relevant policies were reported to the World Trade Organization (WTO) in a prompt and comprehensive manner. China’s subsidies are not linked to exports, and there is no subsidy prohibited by the WTO. The US and EU, however, have notably increased subsidies for green sectors in recent years, some even with exclusionary and discriminatory practices. For example, The US Inflation Reduction Act provides up to US$1.2 trillion for green technology manufacturing. Such a discriminatory subsidy practice violates WTO rules and has been opposed and criticized by many countries.

While scaling up their industrial subsidies, the US and EU have accused China of “overcapacity” due to large-scale subsidies. Isn’t it typical double standards?

Third, China’s new energy sector has made important contributions to the global transition toward green development. Featuring high quality, powerful functions and reasonable prices, China’s new energy products have been well recognized by their users. While meeting domestic demand and helping to achieve China’s carbon peaking and carbon neutrality targets, China’s new energy products have also substantiated global supply and supported the global low-carbon transition. The development of China’s new energy sector has promoted the extensive application of green, digital and artificial intelligence technologies. The new technologies emerged in this process have injected fresh impetus to global technological progress and economic development. Generally speaking, the development of China’s new energy sector has contributed to the welfare of consumers from different countries, global technological advances, and the global green transition.

One cannot just wave the banner of climate response and ask China to take on greater responsibility on the one hand, while wielding the stick of protectionism and not letting Chinese green products benefit the world on the other. Such contradictory and logically confusing words and acts will not work. We hope that the US and EU can view China’s new energy sector and its exports objectively and fairly, stop blaming China for their own problems such as lacking development impetus and competitiveness in new energy sector, and stop resorting to protectionist measures at every turn. Otherwise, they will only add burden on end consumers, weaken motivation for industrial upgrading and erode confidence in global cooperation against climate change, which is detrimental to world economic recovery, prosperity, stability and development. Upholding the principles of fair competition and open cooperation, China will step up communication and coordination with relevant parties and jointly promote global green development.