China Denies Excess Capacity Amid Threat of New U.S. Tariffs
China has denied accusations that its domestic industry is over-capacitated, or has production capacity that exceeds domestic market needs. The rebuttal comes ahead of the announcement of the results of a United States investigation that could lead to new tariffs.
Kyodo News, quoted Wednesday, July 29, reported that the large capacity in a number of Chinese industries, ranging from automobiles, solar panels, cement, to steel, is increasingly in the spotlight from Beijing's trading partners.
Slowing domestic demand has prompted many companies to expand overseas. The surge in exports then made the country's trade surplus, or the difference when the value of exports is greater than imports, reach a record of almost US$1.2 trillion last year.
China's Ministry of Commerce stated that Beijing had never pursued a large trade surplus. This attitude was expressed in a report entitled China's Position on the so-called Excess Capacity Issue.
The report also rejected the term "China Shock 2.0" which has recently been used in a number of Western countries to describe the impact of increasing Chinese products in the global market.
"The United States and other Western countries have put forward the term 'China Shock 2.0' and falsely accused China's industrial development of threatening the monopoly of Western countries," the report said, as reported by Kyodo News.
China called the allegations unfounded and unsupported by facts.
Beijing's attitude is in line with Prime Minister Li Qiang's statement at the World Economic Forum's "Summer Davos" meeting in Dalian. Li said the latest developments should be seen as "China's Opportunity 2.0", not "China's Shock 2.0".
On the other hand, the United States is expected to soon announce the results of an investigation into 16 economies, including China, related to capacity and production in the manufacturing sector. The investigation is expected to pave the way for tariff increases against a number of countries.
On Friday, the US had raised tariffs to 10 percent to 12.5 percent on goods from 60 economies, including China. Washington considers that these countries have not effectively enforced a ban on goods produced with forced labor.
China and a number of countries protested the policy.
Director of the Ministry of Commerce's Policy Research Office, Lin Weilong, said the US was not authorized to unilaterally determine whether its trading partners had excess capacity, then use it as a basis for imposing restrictions.
"The United States cannot narrowly define production capacity that exceeds domestic demand as excess capacity, then give it a surplus label," Lin told reporters in Beijing.
Pressure on Chinese products also comes from the European Union. Earlier this month, the bloc implemented protection for the steel industry as well as restrictions on small package imports from electronic commerce.
Alfredo Montufar-Helu, China expert at consultancy Ankura, said Beijing's stance was unlikely to change the view of Western countries.
According to Montufar-Helu, the economic conditions in the Western market make it difficult for the government to remain silent when imports from China continue to increase, especially in high-value-added sectors previously dominated by Western companies.