China pushes back against Western overcapacity claims in new document
Beijing says it ‘never deliberately pursued a trade surplus’ and that its strong exports are driven by innovation, not subsidies or overcapacity
China’s Ministry of Commerce has released a document rebutting claims of Chinese overcapacity, arguing that its industrial output is not a result of subsidies and insufficient domestic demand, but is instead driven by innovation and reform.
“There is no necessary connection between industrial subsidies and overcapacity,” the ministry said in the position paper published on Tuesday.
Many countries adopt subsidies in pursuit of their developmental needs, the document added, citing Washington’s US$750 billion Inflation Reduction Act of 2022 and the estimated €1.44 trillion in subsidies planned by the European Commission between 2021 and 2030.
Beijing said its own subsidy mechanisms aligned with World Trade Organization rules, adding that authorities had taken “specific measures to clean up and regulate certain non-compliant practices in some localities”.
The position paper comes as China faces mounting pushback from major trading partners, who contend that Beijing’s extensive support – across sectors such as electric vehicles, solar panels and steel – has artificially lowered costs and driven industrial overcapacity.
The commerce ministry, however, also rejected the link between insufficient domestic demand and overcapacity, framing weak consumption as a temporary feature of China’s broader economic transition.