China’s new energy overcapacity solvable by market, not administrative action: academic
- China’s capacity overflow in new energy, which has brought scrutiny from the West, can be solved by its huge market, an analyst has said
In light of increased complaints from the West regarding overcapacity, China should fully tap its domestic demand for renewable energy by solving choke points in consumption, said Zhao Zhongxiu, president of the University of International Business and Economics in Beijing.
“Comparing current domestic production capacity and directional demand, there is actually no so-called overcapacity,” said Zhao, an authority on international trade and global value chains, in an interview with the Post last week.
Excessive production in the sector is the result of a “complete and competitive” supply chain that spurs iterative advancements in technology, Zhao said.
“Not long after the goods of the previous generation were put into production, the new generation of technology has already come out and replaced the old one, which has to exit the market,” he said. “[This] in turn leads to some idle or even wasteful production capacity.”
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Thus, he said, the government should allow the market to eliminate inefficient or outdated production capacity in new energy, rather than issue administrative orders forcing companies to shut down production – a measure China adopted in the past when dealing with the same problem in the heavy industries such as coal, steel and cement that were the backbone of the country’s early modern economy.