A poor competitor
Xin Wang says China is not to blame for US moving at snail’s pace in electric vehicle progress
The latest buzzword in the Western media’s China reporting, “overcapacity”, is yet another addition to Washington’s repertoire of criticism about Beijing’s economic policies and global strategies.
Just a week before her visit to China, US Treasury Secretary Janet Yellen said at a solar energy manufacturer in Georgia that China’s excess production was hurting American firms and workers. Specifically, she hinted that the recent surge in China’s exports of electric vehicles (EVs), batteries and solar panels could create problems for US manufacturers and employees.
US Trade Representative Katherine Tai, who was in Brussels for the US-EU Trade and Technology Council meeting at around the time of Yellen’s visit, was more blunt in her comments on China.
She said Beijing’s non-market policies would have “significantly damaging economic and political outcomes” for the United States and European Union, where firms would struggle to “survive”. She mentioned Chinese overproduction of steel, aluminium, solar panels and EVs as causes of concern and emphasised that China’s overproduction of EVs had become “very motivating for Europe”.
Tai called for “defensive” US-EU countermeasures such as tariffs, along with measures that were “more on the offence”, like incentives “to correct for a market dynamic that is not playing out in our favour”. What Tai’s comments really reveal is US discomfort with Chinese innovation in EVs and other technology areas.
In conflating overcapacity and the broader issues of the electric car market, Washington’s narrative is way off the mark.
It is the US market’s high prices, not Chinese overcapacity, that hinder widespread EV adoption, given that Chinese EVs are excluded from the US currently.
In 2023, the EV share of the total US vehicle market was only 7.6 per cent. The average price of a new electric car in the US is around US$50,000. American consumers who can’t afford such prices have limited choices. Meanwhile, China’s largest EV maker, BYD, offers a subcompact, Seagull, for less than US$10,000.
China has long pursued EV development as a policy priority, in part to fight air pollution and lower carbon emissions. The country’s long-term EV vision emphasises battery research and development, ecosystem and supply-chain building, as well as cost-effectiveness. Its primary market is its own market. Even with the rapid expansion of China’s EV sector, fewer than 10 per cent of cars on the mainland are EVs.
In contrast, the US is lagging in realising even its EV infrastructure ambitions. Despite President Joe Biden’s pledge to build 500,000 EV charging stations by 2030 and approval of US$7.5 billion – enough funding for 20,000 charging spots or 5,000 stations – under the 2021 infrastructure law, only seven stations have been built in more than two years.
Let’s be clear that China has nothing to do with this slow roll-out. In the US, Republican states and fossil fuel companies have historically opposed EV development, while the United Auto Workers, a key Democratic constituency that has endorsed Biden for re-election, also has serious apprehensions about a shift to EVs.
It seems evident that the comments from Tai and Yellen have been influenced by domestic political considerations, especially in an election year in the US, instead of economic concerns.
Furthermore, the criticism that China is hurting other economies fails to recognise how it has had a beneficial impact, particularly on economies in the Global South. China’s infrastructure projects have offered affordable solutions and fostered technological innovation in regions like Latin America, Africa, Southeast Asia and the Middle East.
High-speed rail projects in Indonesia and Vietnam are testament to developing countries’ preference for Chinese technology, over alternatives offered by Japan, for example. These developing countries have not only survived, but also enhanced their infrastructure, thanks to China.
In addressing allegations of unfair competition, it is crucial to understand the multifaceted policies driving China’s EV success. While the US is investing substantial funds, such as US$370 billion through the Inflation Reduction Act, into electric cars, such initiatives primarily benefit American car manufacturers using domestically made components.
In contrast, China’s EV strategy is more inclusive. With the aim of building a robust
EV ecosystem in the country, the Chinese government has offered subsidies and implemented measures that benefit both domestic and foreign EV companies.
Unlike the protectionist stance adopted by the US, China’s approach prioritises industry-wide growth rather than narrow corporate and political interests. State policies are geared towards creating an ecosystem that establishes a complete EV supply chain in China.
The narrative of overcapacity also overlooks China’s efficiency and work ethic, as exemplified by the rapid construction of Tesla’s Gigafactory in Shanghai. Local labour’s dedication and alignment with institutional goals are the key to China’s unique approach to economic development, which US policymakers often fail to comprehend.
Looking at history, the US had concerns about “overcapacity” too in the 1980s, amid competition in the car sector and broader trade tensions between the US and Japan. Washington’s application of the same label to China’s economic practices merely reflects the American mentality towards competition from ascending economies, as well as a narrow understanding of China’s domestic policies and global interactions.
Engaging in politically charged rhetoric only serves to exacerbate tensions and hinder efforts to mend ties and foster healthy business relations between the two countries. Instead of resorting to divisive rhetoric, fostering collaboration and recognising China’s contributions can pave the way for constructive dialogue and mutual understanding.
It seems evident that the comments from Tai and Yellen have been influenced by domestic political considerations