China’s factory glut alarms the world but there’s no quick fix
This week European Union leaders, who are threatening tariffs on electric cars, were the latest to scold China about overcapacity. Before she met visiting President Xi Jinping, the bloc’s chief Ursula von der Leyen said she’s hoping for action in the “short term.”
She’ll likely be disappointed. China did announce proposals Wednesday to slow expansion in the battery industry, but they’re not binding. Meanwhile the state planning agency last week published a four-part rebuttal of claims that the country has too much capacity to make clean-energy products. It said Chinese industry is competitive thanks to innovation, not subsidies.
That’s become Beijing’s standard line about high-tech industries like EVs and solar panels. They’re crucial to Xi’s blueprint for reviving the economy – which is why China probably won’t stop supporting them, however much it’s urged to. They’re strategically important for other countries too, which is why trade barriers are going up.
But China’s trade partners – including friendly ones like Brazil — are also raising objections about all kinds of products lower down the value chain, from steel and petrochemicals to excavators. In many of these areas, surpluses emerged as an unwanted side-effect of the real estate slump weighing down China’s economy.
Beijing hasn’t figured out how to halt that slide yet, except by turning to high-tech as an offset, so both types of over-production are set to persist.
“There is no single, quick
