The accusation of “excess capacity” leveled at China has too often been shaped by political rhetoric rather than disciplined economic reasoning. The charge of “excess capacity” may sound technical, yet in many recent discussions it has been used as a broad label for discomfort with China’s industrial competitiveness. A serious evaluation must begin from facts, legal standards, market principles and industrial history. It cannot rest on the assumption that successful production becomes problematic simply because it comes from China. Seen in that light, the document “China’s Position on the So-called Excess Capacity Issue”, released by the Ministry of Commerce of China on Tuesday, provides a timely and necessary clarification of an argument that has become increasingly imprecise.
The first point is conceptual. Capacity itself is not evidence of wrongdoing. It is a normal feature of global industrial development, particularly in sectors that require long-term investment, technological accumulation and large-scale production. Modern industries do not expand by waiting for present demand to become fully visible. They are built through anticipation of future markets, future technologies and future social needs. Railways, automobiles, aviation, semiconductors, renewable energy and digital infrastructure, among others, all developed through investments that often preceded immediate consumption; Western industrialized countries have dominated many of these industries and kept exporting their products to other countries for decades. To describe forward-looking production as excess whenever it appears in China is to mistake industrial preparation for economic distortion.
This definitional weakness becomes clearer when domestic demand is treated as the only legitimate measure of production capacity. International trade exists precisely because countries produce beyond their own immediate consumption in areas where they possess comparative strength. If production above domestic demand were automatically suspicious, the logic of global commerce would collapse. Germany could be questioned for automobiles; the United States for aircraft, software, semiconductors and advanced technology; the European Union for aircraft, pharmaceuticals and luxury goods; and dozens of resource exporters for energy and minerals. Export capacity has long been accepted as a lawful and productive expression of specialization. It cannot be praised as efficiency in established industrial powers while being condemned as excess in a rising economy.
The same caution applies to trade-surplus figures. A surplus reflects multiple forces, including savings patterns, investment structures, supply chain organization, consumer preferences, exchange relations and global demand. It does not prove that goods are unwanted, unfairly produced or forced into foreign markets. In many important sectors, Chinese exports have grown because they respond to genuine international needs. Solar panels, batteries, electric vehicles, industrial equipment and consumer goods are not redundant objects searching for buyers. They are practical products that help reduce energy costs, support climate goals, improve infrastructure, and ease inflationary pressure on households and businesses. Restricting their importation may shelter certain local firms, but it also raises costs for consumers and slows technological diffusion.
In an age marked by climate pressure, tech transition and uneven development, the answer is not to fear efficient production but to govern trade with reason, consistency and respect for the shared right of nations to develop
The legal dimension is equally important. There is no general rule in international trade law that allows one country to declare another country’s productive capacity unlawful merely because it is large or competitive. Trade law contains procedures for dealing with dumping, prohibited subsidies and measurable injury, which require evidence, due process and reasoned analysis to implement. A vague politically charged accusation about overcapacity cannot replace legal proof. If powerful economies can unilaterally label competitive industries as excessive and then impose restrictive measures, the distinction between lawful trade defense and protectionism becomes dangerously blurred. The rule of law in trade depends on standards that apply equally to all parties, not on standards adjusted to preserve older advantages.
This is why the narrative about subsidies must also be handled with caution and precision. Public support for research, infrastructure, energy transformation, strategic technology and industrial upgrading exists in many major economies. Industrial policy is not unusual in Washington, Brussels, Tokyo, Seoul or elsewhere. The relevant question is whether measures violate agreed rules, not whether a government has any role in industrial development. China’s position is therefore reasonable in insisting that disputes be examined through multilateral mechanisms and objective evidence. It does not deny the need for trade discipline. Rather, it resists the use of selective accusation as a substitute for legal procedure.
The claim that China’s competitiveness is mainly the result of “distortion” also overlooks the real sources of its manufacturing strength. China’s industrial rise reflects decades of investment in education, engineering capacity, transport networks, ports, power systems, research institutions, skilled labor, supplier coordination and production management. It also reflects intense domestic competition. Chinese firms operate in a large and demanding market where price, quality, reliability, design and technological improvement are tested continuously. In sectors such as electric vehicles, batteries and renewable energy, weak firms face sharp pressure and rapid elimination. Success in such an environment cannot credibly be reduced to an artificial policy effect.
Nor should slower domestic demand be treated as a complete explanation for export growth. China remains a vast market undergoing structural change, urban improvement, industrial upgrading and green transformation. Demand is not limited to short-term household consumption. It also includes investment in cleaner energy, advanced transport, digital infrastructure, health tech, modern logistics and manufacturing renewal. A country of China’s scale must maintain productive capacity before every future need appears in final consumer statistics. Industrial readiness is part of economic security, tech progress and stable global supply.
The broader danger in the “overcapacity” narrative is that it risks turning competitiveness into an accusation. If market outcomes are accepted only when they preserve existing industrial hierarchies, then the language of fairness loses credibility. Fair competition means allowing firms from different countries to challenge one another through efficiency, innovation, quality and cost. It does not mean protecting older market positions by redefining new success as a threat. A genuine rules-based order must welcome new centers of productivity rather than treating them as abnormalities.
For many developing countries, China’s manufacturing capacity is not a danger but an opportunity. Affordable energy equipment, machinery, vehicles, telecommunications products and infrastructure inputs lower the cost of modernization. They give countries with limited fiscal space more choices and greater bargaining power. If these goods were to be restricted in the name of “correcting excess”, the result would be higher prices, slower development and narrower tech access. That would not strengthen global fairness. It would preserve scarcity for those least able to afford it.
In an age marked by climate pressure, tech transition and uneven development, the answer is not to fear efficient production but to govern trade with reason, consistency and respect for the shared right of nations to develop.
The author is a solicitor, a Guangdong-Hong Kong-Macao Greater Bay Area lawyer, and a China-appointed attesting officer.
The views do not necessarily reflect those of China Daily.
