China’s economy simply can’t shake off the COVID blues, with falling GDP and an asset market imploding.
Their solution, for now, is to offload them to the world by shipping a bunch of products to everyone else.
Let’s take a common energy product: solar panels. Chinese brands are generating so many solar panels that global glut and consequent falling costs are prompting others to install them on their lawn fences.
U. S. Treasury Secretary Janet Yellen is trying to tackle the overproduction factor on its scale in China, which ends Tuesday. Yellen is one of the most sensible U. S. officials to make a stop in China during Biden’s tenure.
Yellen told a meeting of the U. S. Chamber of Commerce in Guangzhou on Friday that China’s overcapacity production has intensified recently, according to Reuters.
He said this is “leading to production capacity that exceeds China’s domestic demand, as well as what the global market can support. “
On Wednesday, Yellen said regions were feeling the effects of China’s oversupply, adding Europe, Mexico and Japan.
These considerations are China’s painful economic transition from a lower-cost real estate and production sector to three new pillars of expansion in the green generation sector: solar cells, electric cars, and lithium-ion batteries. But Chinese consumers aren’t spending as much at home anymore. like they used to.
“We’re seeing a growing risk of losses that they’re going to have to sell their production somewhere,” an unnamed senior U. S. Treasury official told Reuters on Thursday.
The European Union is already taking action for its domestic production sector in key emerging sectors, adding microchips and electric vehicles, while Thailand imposes a 7% tax on all imported goods, just to mark the playing field.
Competition for production is even more intense today due to deflation in China, which began last year. China has the only primary economy in the world that faces negative prices for customers.
Certainly, there is no overcapacity or overproduction in all sectors of Chinese industry, as a Bloomberg investigation published on Tuesday reveals. The challenge is basically in areas where China already had an advantage over the West, such as low-tech goods and structural fabrics after the recent real estate crisis.
China’s production of solar panels and batteries is also outpacing demand, but the festival is expanding into a key new area of contention: electric vehicles.
Last year, China was on par with Japan as the world’s largest exporter of cars, in part because of the sheer volume of electric cars shipped through the world’s second-largest economy.
But Chinese EV brands are flooding the market due to overproduction. They’re simply effective, as Bloomberg’s research reveals. Even as China is making more electric vehicles, there hasn’t been a significant buildup of inventories, according to Bloomberg data.
While there is overcapacity in China’s auto sector, Bloomberg reported that older internal combustion cars have most commonly fallen out of favor in China.
Beijing knows that the country has overcapacity in some sectors, which is also bad for its own economy.
After all, Chinese solar brands are suffering the consequences of their solar panel overcapacity. In March, Longi Green Energy Technology, the world’s largest solar cell manufacturer, announced the layoff of thousands of employees due to overcapacity and low prices.
After China’s annual parliamentary meeting last month, Chinese Premier Li Qiang vowed in his annual policy report to “prevent overcapacity” in key sectors.
However, China presents Western considerations about overcapacity as protectionism and as a measure to curb the country’s economic development.
“Although it’s just a fundamental economic theory, surplus products naturally seek markets once domestic demand is satisfied, and Western countries have been doing this for centuries, when it comes to China, it becomes an ‘overcapacity problem’ that threatens the world. ” the Chinese government said. The state-run Xinhua news firm wrote in an op-ed last March, calling Western grievances a “double standard. “
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