China’s overcapacity so ‘deeply rooted’ at local levels that analysts say its ebbs and flows have underpinned economy for decades
- The tsunami of new-energy manufacturing flooding the industry is not the first time a wave of Chinese goods has forced institutional upheavals
- Academic addresses how government subsidies and loosened environmental regulations helped increase production capacity in China, leaving foreign firms little room to compete
With a degree of carte blanche in guiding and funding industrial expansions, China’s local governments have played an outsized role in propagating the country’s overcapacity conundrum, according to specialists in economic development and trade.
Amid heightening accusations from the United States and Europe that China’s excess capacity has strangled their own manufacturing sectors – especially in the new-energy realm – Beijing has recently begun taking a harder line in pushing back.
Xi now contends there is no such thing as “China’s overcapacity problem”. And Beijing argues that, from a global perspective, there is actually a shortage of capacity in the new-energy sector.
Still, Beijing’s concerns and evaluations of unchecked manufacturing have been well documented over the past three decades, with acknowledgements that institutional and mechanism factors – including local governments’ excessive involvement – have long led to instances of overcapacity weighing on the economy.