West’s ‘overcapacity’ claim cannot distort benefits of Chinese imports
China is embarking on a massive transition, redirecting substantial investment from the real estate sector to the development and manufacturing of clean technologies. The goal is to provide both domestic and international markets with cutting-edge, high-quality products to combat climate change.
This strategic shift heralds a new era of growth, bringing vast opportunities for businesses. The surge in clean technology investment has reinvigorated China’s renowned large-scale investment economic model and opened up a promising avenue for those seeking to be part of the clean energy revolution.
The newest discoveries and inventions made by Chinese scientists and engineers, along with the integration of the latest technologies into production processes, have sparked fierce competition among manufacturers. This, in turn, has led to a remarkable decrease in the prices. In just one year, the cost of solar panels dropped by an unprecedented 42 percent, which is much higher than the average historical decrease of around 17 percent per year. Their prices are nearly two-thirds lower than their US counterparts, helping them to win market share.
The entire world will benefit from these price drops. However, wealthy countries are protesting and erecting barriers. They are doing this for only one reason – they have become uncompetitive.
Recently, Western governments and media outlets have started using new terms such as “decoupling” and “de-risking” to prevent China’s latest products from entering their markets. This new narrative has been followed by threats of protectionist measures against the newest Chinese products, such as electric vehicles (EVs). And since the beginning of the year, they have started using another term – “overcapacity.” US Treasury Secretary Janet Yellen has accused China of having “overcapacity,” which she says distorts global prices and production patterns.
The proponents of the novel term fail to comprehend that the notion of “overcapacity” is irrelevant in the production of the newest EV models, where production commences only after receiving a required number of orders.
Previously advanced Western countries did not prevent competitive Chinese goods from accessing their markets. As a result, billions of consumers benefitted from high-quality and inexpensive products, and global inflation was kept at low levels for an extended period. The assumption was that simple product manufacturing would not be able to challenge Western dominance in scientific discoveries and new technologies.
However, in the past few years, China has “quietly” and “unexpectedly” surpassed Western countries in knowledge-intensive industries. The primary reason behind the success of Chinese producers is their fierce competition within the local market across all manufacturing fields. This competition drives individuals and businesses to work harder, innovate, and develop unique solutions to stay ahead of rivals.
History has taught us that trade protectionism is a recurring and common phenomenon that has not helped solve the problems of jurisdictions that resort to such measures. Will the West repeat its past mistakes, as demonstrated, for example, in the steel sector, by protecting its “sovereign” green industries? Any politically motivated actions that do not consider the facts and are based on artificially constructed rhetoric will once again lead to disappointment.
The author is former prime minister of Kyrgyzstan, a distinguished professor of the Belt and Road School of Beijing Normal University, a member of Nizami Ganjavi International Center, and the author of the book Central Asia’s Economic Rebirth in the Shadow of the New Great Game. bizopinion@ globaltimes.com.cn