At the recently concluded 135th China Import and Export Fair (Canton Fair), the "new three" of foreign trade—represented by electric passenger vehicles, lithium batteries, and solar cells—were highly favored by overseas buyers. This is a rational choice driven by market demand, and also the result of long-term innovative R&D by Chinese manufacturing enterprises and efficient collaboration among supply chain companies, reflecting the comprehensive cost advantages and product competitiveness of Chinese manufacturing.

This year coincides with the US election year. Some politicians, under the pretext of "overcapacity," practice trade protectionism, putting forward the so-called "China new energy overcapacity" narrative and using it as a political bargaining chip, placing political considerations above economic concerns. The result will not only harm others but also themselves, but will also undermine the stability and smooth operation of global industrial and supply chains, hinder world economic and trade growth, and drag down the global economy's green and low-carbon transition.

Overcapacity is a common economic phenomenon. Under market economy conditions, the balance between supply and demand is relative, and imbalance is the norm. To resolve such imbalance, we must mainly rely on market forces and adjust according to the law of value. It should be pointed out that production capacity is not the same as products. Overcapacity does not mean that too many products have been produced and cannot be sold; rather, it refers to a state in which an enterprise's production capacity has not been fully utilized. Moderately advanced capacity investment is a common choice in industrial development, especially for emerging industries.

With an accurate grasp of this essence of overcapacity, it is not difficult to understand why this year's Government Work Report proposed "preventing overcapacity and low-level redundant construction." During the more than three years of the COVID-19 pandemic, when global supply chains almost came to a standstill, the reason Chinese manufacturing could continue to steadily provide various goods to the global market was closely related to the rapid growth of fixed asset investment in manufacturing at that time. The investment made then is now continuously being converted into production capacity. However, global market demand is currently slowing down, leading to insufficient capacity utilization in some industries. It can be judged that this phenomenon is temporary. As the world economy recovers, low-end and backward production capacity in some industries will be phased out and cleared at a faster pace, while advanced capacity in the new energy sector, which represents the direction of green and low-carbon development, will still gain greater room for development.

Comparing this with reality, it can be seen that the remarks by some US politicians that "China's overcapacity threatens the industrial development of other countries" and "brings disaster to the international market" are entirely groundless. In the first quarter, China's capacity utilization rate for industrial enterprises above designated size was 73.6%, basically close to the US utilization rate of 78.4%. In terms of inventory levels, China's raw material inventory index in March was 48.1%, comparable to that of the United States. However, in terms of industrial profits, China's industrial profit margin has shown a trend of sustained growth. In addition, China's new export order index was 50.6%, continuing to remain in expansion, indicating that enterprises' export business continues to improve overall. In this sense, the accusation of "overcapacity" actually stems more from anxiety about and an attempt to contain the development of China's industrial strength—some US politicians are also well aware that the advantages of China's new energy industry have been earned through the efforts of enterprises and shaped through full market competition, rather than formed "by government subsidies" as they claim.

As is well known, some US politicians claim that "China has overcapacity in new energy." In fact, the local market does have demand for Chinese new energy vehicles, photovoltaic products, and other products, but domestic enterprises and products lack sufficient competitiveness, thus creating pressure from the survival of the fittest. It is certain that their accusations against Chinese new energy products are neither consistent with objective facts nor with economic laws. At the recent Spring Meetings of the International Monetary Fund and the World Bank held in Washington, D.C., participating economists and professionals also expressed puzzlement and doubt about the so-called "China new energy overcapacity" narrative, because whether analyzing market supply and demand or observing the reality of industrial development, no such puzzling conclusion can be drawn.

　　The "China new energy overcapacity" narrative is a false proposition, and the competitive strength of China's new energy products is beyond doubt—

First, the rapid growth of China's new energy industry scale is not blind expansion, but is based on the urgent need for global carbon emission reduction. Reports from the International Energy Agency show that by 2030, global demand for new energy vehicles will reach 45 million units, more than three times that of 2023. Calculations by the International Renewable Energy Agency also show that in order to achieve the goals of the Paris Agreement, the cumulative installed capacity of global photovoltaic power generation must reach at least 5,400 GW by 2030, nearly four times the total global installed capacity in 2023 and about nine times China's total installed capacity. Obviously, the current global capacity of new energy products is still far from meeting future market demand. For a long period to come, China's new energy products will remain in strong demand in the market. The enormous demand brought by the global carbon emission reduction process will be the driving force for China's new energy industry to continue its transition toward the high end.

Second, subsidies for the new energy industry are a commonly used market tool worldwide, not a unique advantage of China's new energy industry. To address climate change and achieve global carbon emission reduction targets, countries around the world are extensively subsidizing their own new energy industries. For example, the United States began subsidizing new energy vehicle sales through tax credits as early as 2010, and even arranged $7.5 billion through legislation such as the Infrastructure Investment and Jobs Act to support the construction of charging facilities. Japan began providing subsidies for electric, clean diesel, and other clean energy vehicle models as early as 2008. Germany also began implementing universal subsidies for new energy vehicle sales in May 2016. China implemented a broad new energy vehicle subsidy policy starting in 2013, and with the expansion of the market scale, the policy was officially withdrawn in 2023. It can thus be seen that the "subsidy advantage" argument for overcapacity is completely untenable.

Third, the export advantages of China's new energy products stem from deep technological accumulation, enormous economies of scale, and a complete industrial system. Under the role of market mechanisms, China's new energy products have achieved advantages in capacity and price through full market competition and iterative technological innovation, which is the result of Chinese enterprises' own continuous efforts. For example, through technological innovation, China's photovoltaic industry has effectively solved the two major problems of high costs and difficulties in grid connection. At the same time, China's enormous market scale provides ample space for the rapid renewal of new energy technologies. Economies of scale not only reduce costs but also accelerate the implementation and promotion of new technologies and new products. Taking new energy vehicles as an example, China's huge consumer market and diversified vehicle-use environment provide broad space for the iterative upgrading of the new energy vehicle industry.

In international economic and trade exchanges, we firmly oppose trade protectionist measures that suppress Chinese enterprises in the name of "overcapacity." At present, the global capacity layout is the objective result of the combined effect of market laws and economic globalization. It is an inevitable requirement for countries to carry out division of labor and cooperation and optimize factor resources based on their own comparative advantages, and it is also an important measure to improve production efficiency and enhance people's well-being. Whether viewed from the perspective of comparative advantages or global market demand, there is no so-called "China new energy overcapacity" problem.

As President Xi Jinping pointed out during the trilateral meeting of the leaders of China, France, and the EU, China's new energy industry has developed real skills in open competition and represents advanced production capacity. It has not only enriched global supply and eased global inflationary pressure, but also made tremendous contributions to the global response to climate change and green transition. In addressing the common challenge of global climate change, all countries are an interdependent community of shared interests that integrate and help one another, and openness, inclusiveness, and win-win cooperation are the ** correct choice. Only free trade and full competition can produce the optimal solution for the global capacity landscape and make the foundation of global green development brighter and its quality more solid.