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Debunking the myth about China’s ‘overcapacity’

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By Tichaona Zindoga


…Global economy needs affordable Chinese goods

Everyday, Western media seek to paint a gloomy picture of China’s economy and how it is allegedly slowing down and abandoned by investors.

Take the example of an article by Bloomberg on May 21 which claimed that, “China’s economic miracle is ending” and that after the so-called real estate collapse, trade war with the US, a crackdown on entrepreneurs, and extended Covid lockdowns “the blows have just kept coming”.

A September 2023 article on BBC website cited similar “problems” of “slow growth, high youth unemployment and a property market in disarray”.

It has become a ritual for some outlets such as the Economist to predict China’s economic collapse every year, but this has never quite happened since the Western media began peddling this self-indulgent narrative back in the 1990s.

The Western media representations appear to be more of a wish by American and European powers, rather than the reality, with experts pointing out double standards of the media when reporting on China’s economy, often vacillating between “China collapse” and “China threat” theories. The media also manipulate statistics to paint a rosy picture of Western economies and gloomily portray China’s economy; and at the same time selectively ignoring positive news about China’s economy and spreading panic and misinformation to discredit China.

On the other hand, the same media, suffering from a kind of cognitive dissonance, have lately been pushing the narrative of China’s “overcapacity”, which is understood to be a situation where the country’s industrial production capacity exceeds the demand for its products.

Western countries such as US and Europe are at the forefront of complaining about this unique “problem” which, in the context of globalisation, should not be a problem to the rest of the world including African countries such as Zimbabwe. But then, the West have been pushing for “deglobalisation” and protectionism.

During her recent trip to China, U.S. Treasury Secretary Janet Yellen repeatedly blasted Beijing’s industrial “overcapacity” for threatening the global economy. This latter claim is misleading, and this article offers an alternative view of why massive Chinese capacity to produce goods, coupled with its opening up and extension of industrial supply chains, is ultimately beneficial to world economy.

In principle, we argue that the West is adopting a narrow and selfish approach, or “silo mentality” which is at variance with what the world needs.

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Context is key. China’s innovativeness and dilligence has meant that the country is producing more and more, leading to cheaper goods on the market. This is good for both developing and developed countries.

According to information available, among the global 500 new energy enterprises of 2023, over half were from China, showing a clear advantage of China on the global clean technology market. China now produces 80% of the world’s solar panels, 40 times that of the US, and makes about two-thirds of the world’s new energy vehicles, wind turbines, and lithium batteries. Chinese firms are challenging US and European dominance over the clean sector.

Domestically, China’s economy performed well in the past year, performing better than both the US and Europe. Its GDP reached 5.2% in 2023,  higher than the 3% in 2022 and showing stronger post-Covid resilience. China’s value-added industrial output increased 7% during the January-February period, accelerating 0.2 percentage points from December 2023.

Economic indicators such as employment remained generally stable, value added industrial output grew, services sector accelerated while similar growth was recorded in retail sales and fixed asset investment.

These positives have rallied into 2024.

Early this year, while explaining China’s strong economic footing, Foreign Minister Wang Yi said China remained strong as an engine for growth.

“The next China is still China,” Wang said.

Wang explained that China’s development was driven not only by a reasonable growth in quantity but also an effective upgrade in quality. In China, emerging industries are booming, green transition has yielded impressive outcomes and social expectation is improving steadily while new quality productive forces are taking shape at a faster pace.

Wang explained that, “China’s super-sized market, with over 1.4 billion people, is unleashing opportunities for the world” and that  the “explosive growth” of new demands and new business forms is rapidly expanding the room for China’s own development and for its cooperation with the world.

China is in a strong position, and those complaining about the so-called overcapacity are merely projecting their own declining stature and failure to compete.

This is why, for example, te US has resorted to all sorts of dirty tactics such as imposing crippling sanctions on Chinese companies, protectionism, pursuing deglobalisation and trying to steal a Chinese company behind the popular application TikTok.

This contrasts sharply with what China is doing to the global economy as it opens up further. China is opening its door wider, opening up and reducing tariffs in line with the World Trade Organization (WTO) standards while, among other things, China is lifting restrictions on foreign investment access in the manufacturing sector, opening up the service sector and offering return on investment for foreign businesses.

China has expanded its global and regional economic footprint through new institutions, such as the Asian Infrastructure Investment Bank (AIIB) and the BRI as it “seeks to carve out a leadership position within the global economy”.

China is in the process of strengthening  various platforms for international cooperation, including the China International Import Expo (CIIE), the China International Fair for Trade in Services (CIFTIS), the China International Consumer Products Expo (CICPE), and the China International Supply Chain Expo (CISCE).

In 2023, 15 Zimbabwean companies participated at the 6th China International Import Expo (CIIE), that was held in Shanghai, China in November. The fair, which ran under the theme,  “New Era, Shared Future”, had participants from the public and private sectors.

A local newspaper reported that since its inception in 2018, CIIE had become a significant platform for promoting global trade and facilitating international cooperation. It is designed as a comprehensive platform to showcase products and services from around the world, promote bilateral trade and foster economic globalisation. The expo features various exhibition areas, including trade in food and agricultural products, consumer goods, services, automobiles, equipment, technology and healthcare.

Zimbabwe’s participating companies, led by ZimTrade, were drawn from processed foods, leather and arts and crafts and crafts sectors and its chief executive officer Allan Majuru is quoted as saying “China is a valuable market for Zimbabwean products”.

China’s continued growth is reassuring and a good sign for the global economy, and to Zimbabwe.

China is on a solid economic footing because of its comprehensive industrial system, well-connected infrastructure networks, and tech-focused drivers underpin the resilience and vitality of Chinese economy.

Its potential in urbanization, service and green sectors will be further tapped, and new quality productive forces fostered to sustain growth.

All this cannot be viewed in negative light, which Western forces seek to shove down people’s throats because the world need China now and is closely cooperating with it for mutual benefit.

Illustratively, while Europe and the US complain about China’s so-called overcapacity say in the production of electrical vehicles and steel, emerging economies and markets in the Middle East and Africa require these goods and have increasing capacity to absorb China’s goods, even then cheaply thereby accelerating the global economy.

*Zindoga is the Director of Ruzivo Media & Resource Centre, a Zimbabwean think tank that analyses global and local issues.