During the recent visit of the Chinese Communist Party leader to Europe, one of the focal points of international attention is China’s “overcapacity” and global dumping, which have been disrupting the international market. However, Xi Jinping denied these accusations. Experts believe that the massive subsidies given by the CCP regime to industries like electric vehicles are aimed at pursuing socialist scale economy, intending to dominate the international market and control the world.
On May 8, Ursula von der Leyen, President of the European Commission, stated in a speech in Berlin that the EU market is flooded with Chinese electric vehicles that have received substantial government subsidies, emphasizing the need to address this issue to protect their industries.
Two days earlier, during meetings with French President Emmanuel Macron and Ursula von der Leyen, Chinese Communist Party leader Xi Jinping claimed that from a comparative advantage and global demand perspective, China does not have an “overcapacity” issue.
Professor Xie Tian from the School of Business at the University of South Carolina told Dajiyuan that Xi’s denial contradicts the EU’s accusations. “China indeed has a severe overcapacity. Recently, the CCP government has been promoting the so-called ‘new quality productivity’, with electric cars being one of the three driving forces. China has over 280 various electric car companies with an annual production capacity of 27 to 25 million vehicles, while the Chinese market can only absorb 15 to 17 million vehicles, clearly indicating overcapacity.”
After the trilateral meeting, Ursula von der Leyen stated at a press conference that the CCP government’s subsidies to the electric vehicle and steel industries pose a severe threat to the European industry, potentially leading to “deindustrialization in Europe” and making it difficult for the world to absorb China’s surplus products.
According to data, in 2023, China’s production and sales of new energy vehicles were world-leading for the ninth consecutive year, with exports accounting for 38% of the European market.
Chinese electric vehicles are rapidly expanding in the European market, capitalizing on their price advantage through cheap dumping. The EU is conducting an investigation on this issue to determine whether tariffs should be imposed.
Since China’s accession to the World Trade Organization (WTO) until 2011, a large influx of Chinese-manufactured goods poured into the US, leading to the loss of at least 2 million jobs in the US manufacturing sector due to what was termed as the “China shock.”
Twenty years after joining the WTO, China’s global commodity exports have exceeded 14%, with the impact of “China shock 2.0” being more significant and widespread, causing more severe damage to the international market.
Janet Louise Yellen, the US Secretary of the Treasury, has mentioned that President Joe Biden will not allow history to repeat itself.
The CCP government has continuously provided policy subsidies to industries it supports, and after the pandemic to promote economic growth, it has increased compensation efforts and implemented policies such as tax reduction, fee reduction, and low-interest loans for manufacturing, thereby increasing production capacity, resulting in “China Shock 2.0.”
According to the OECD, global excess steel production capacity exceeds 550 million tons, with the majority coming from Chinese companies.
In 2023, China’s steel exports hit a seven-year high, with an annual increase of 36.2%, but prices dropped by 20% to 30% from a year earlier; solar panels are cheap enough to be used as fences; and electric cars are sold well below international market prices.
According to a survey by Nikkei News, among more than 5,000 listed Chinese companies, five of the top ten companies receiving government subsidies in the first half of 2023 were electric vehicle or electric vehicle battery manufacturers, with subsidy amounts doubling year by year. Among them, BYD received subsidies of 1.78 billion yuan, nearly tripled from the previous year.
The Center for Strategic and International Studies (CSIS) estimated that the CCP regime invested $173 billion to subsidize new energy vehicle companies in hopes of dominating the industry.
In February of this year, BYD launched a hybrid car with a retail price slightly higher than $11,000. One of the important reasons for obtaining such a high cost-performance advantage is the special subsidies provided by the CCP government.
Xie Tian pointed out that the CCP government enlarges industries through policy subsidies and engages in low-cost dumping in the international market. In fact, it aims to defeat foreign competitors. “Even if it doesn’t make money, it still wants to sell, just to defeat its opponents. After defeating its opponents, the CCP naturally hopes to monopolize the market and dominate the world.”
In fact, what the CCP is doing is not a market economy, but economies of scale, pursuing economies of scale, and the goal is to make enterprises bigger and stronger, with absolute monopoly power.
He emphasized, “Once the CCP monopolizes the international market, it will definitely raise prices again. By then, the automotive industry in other countries has been destroyed by it, and everyone may not have a chance to fight back—this is the CCP’s approach.” However, “this is unacceptable to Europe and the United States.”
Since China joined the WTO, the CCP has used China’s cheap labor and other low-cost advantages, combined with loopholes in related trade preferences, to sell cheap goods to the world, forming a considerable share of global markets for “old three items” such as clothing, household appliances, and furniture.
Chinese textile and clothing exports have accounted for one-third of the global market for many years; since 2006, China has become the world’s largest exporter of furniture, with a current output value of over 35% of the global market; among Chinese household appliances, washing machines and refrigerators account for over 50% of the global market, and air conditioners account for over 80%, with exports ranking first in the world.
In 2023, China’s trade surplus soared, with a total trade surplus of about $800 billion.
Japanese media reported that the so-called Xi Jinping economics aims to shift the side effects of “overcapacity” to the global market and attempt to fill the gap in real estate with high-tech manufacturing. Although few understand what “new productive forces” are, both Europe and the United States are wary of China’s “output deflation.”
In response to China’s overcapacity and the problem of flooding the world with products, Trump began imposing sanctions after taking office in 2018, and the Biden administration further increased restrictions on the CCP, expanding from the economic and trade fields to diplomacy, national defense, and almost all areas, and joined forces with international allies such as Japan, the UK, and the EU to counter the CCP and curb its continued disruption of the international order.
On April 8th, Yellen warned the CCP’s overcapacity and the problem of dumping goods globally at the U.S. Embassy in China. Yellen warned before leaving that China’s electric car companies, relying on government subsidies, have led to overcapacity and impacted the global market, “distorting market prices.”
In late February, the U.S. Department of Commerce launched an investigation into the intelligence security risks of China’s electric car production; on April 3rd, the EU announced an investigation into possible subsidies to Chinese solar panel companies.