China overproducing green technology
United States Treasury Secretary Janet Yellen warned China last weekend against over-producing clean-energy products such as solar panels, wind turbines and electric vehicles (EVs) in the race to slow climate change.
During a trip to China, Yellen said the country’s unfair trade practices — dumping artificially cheap products on global markets — were a threat to US businesses and jobs. Washington is considering imposing higher tariffs and closing trade loopholes if Beijing maintains its existing policy.
Chinese firms can often undercut their Western counterparts for many reasons, including cheaper labor and economies of scale. But they also benefit from very generous state incentives, which help to make foreign rivals uncompetitive. “Chinese subsidies are pervasive,” Rolf Langhammer, former vice president of the Kiel Institute for the World Economy (IfW-Kiel), told DW. “They encompass almost all industries and are far larger than any EU or US subsidies.”
Beijing’s industrial subsidies are on average three to four times higher than in Organisation for Economic Co-operation and Development (OECD) countries — sometimes up to nine times as much. A report published this week by IfW-Kiel estimated that industrial subsidies amounted to 221 billion euros or 1.73% of China’s gross domestic product in 2019. Another study put annual subsidies typically at around 5% of GDP. The IfW-Kiel report revealed how Chinese subsidies for domestic green-tech firms had increased significantly in 2022. The world’s largest EV maker, BYD, received 2.1 billion euros, compared with 220 million euros just two years earlier. Support for wind turbine maker Mingyang rose from 20 million euros to 52 million euros.
In addition to the huge subsidies, the report’s authors noted, Chinese producers also benefit from preferential access to critical raw materials, forced technological transfers and less domestic red tape than their foreign competitors.
“US and European nervousness is coming at a time when electric vehicle demand [in the West] has faltered a bit,” Brad W. Setser, a senior fellow at the Council on Foreign Relations, told DW. “It now looks like China is going to be an even bigger exporter of electric vehicles going forward.”
Last year, China sold more than 100,000 cars overseas, most of which were EVs or plug-in hybrids. The country’s EV exports rose 70% in 2023 and were valued at $34.1 billion. Europe was the largest recipient of Chinese EVs, nearly 40% of electric cars exported.
In October, the European Union began a probe into whether it should impose higher tariffs on Chinese-made EVs to “offset state subsidies and to level the playing field.” Brussels currently levies a 10% tariff on Chinese-made vehicles and, according to media reports, a retroactive 25% tariff could be introduced as early as July. Industry analysts say the move would make medium-sized Chinese sedans and SUVs more expensive than their European equivalents.
Washington already levies a 27% tariff on Chinese EVs and is also preparing to raise them further to bolster its auto industry.
Despite concerns over tariffs and future access to Western markets, Chinese producers have vowed to increase output. The world’s biggest battery maker, CATL, said it would press ahead with its aggressive expansion plans. BYD told investors recently that it targeted a 20% sales increase this year.
Langhammer noted that the West also benefits from the Chinese subsidies, as consumers can buy cars at a lower price while companies can access cheaper Chinese parts. Despite the threat from cheaper Chinese EVs, he said, some automakers were skeptical about the EU probe into Beijing’s subsidies as firms such as Germany’s Volkswagen and US EV leader Tesla receive them, too.
This article was provided by Deutsche Welle
Edited and published by J.P.VIJAYARAJ for Thanthi Trust at 86, E.V.K. Sampath Road, Vepery, Chennai - 600 007 and printed by him at Thanthi Press, No. C14B & C14C MMDA’s Industrial Complex, Maraimalai Nagar, Chengalpet - 603 209. RNI No. TNENG/2016/71392