Politicizing ‘overcapacity’ issue goes against global economic rules

Chinese Foreign Ministry spokesperson Mao Ning on Tuesday responded to the U.S. allegation that China’s new energy sector faces the problem of “overcapacity,” saying that politicizing and securitizing trade issues such as hyping “overcapacity” go against economic laws. It is not conductive to its domestic industry and will disturb world economic stability.

Mao said that whether there is “overcapacity” in production should be gauged in the context of global market demand and future development potential. The solution primarily depends on the market adjusting itself in keeping with the well-understood economic principles. 

China believes that all parties should adhere to fair competition and open cooperation in the market economy, and handle disputes and differences in accordance with the WTO rules. It is important to jointly maintain the stability of the global supply chain, Mao noted.

The remarks come after U.S. Treasury Secretary Janet Yellen expressed concern over China’s “overcapacity” in certain industries and its potential impact on American workers and business during her recent trip to China. Yellen said that the U.S. government will push for changes in China’s industrial policies.

Discussing Yellen’s visit, China’s Vice Finance Minister Liao Min said on Monday that China provided a full and rational response to the issue of industrial capacity.

“The so-called ‘overcapacity’ is the manifestation of the market mechanism that plays its role. The balance between supply and demand is relative, while imbalance is often the norm,” said Liao.

Noting that “overcapacity” issue appeared in both the U.S. and other Western countries many times in past history, Liao said, “The solution to the problems mainly depends on the market adjusting itself according to the law of value.”

Liao said he believed trade protectionism will not help in addressing the issue of industrial production capacity, and called for “pragmatic” and “rational” policy moves.

“China has taken note of the concerns of the U.S. and other relevant parties, and is willing to strengthen communication and coordination with all parties to view and properly handle differences in a rational manner, on the basis of adhering to the principle of marketization,” he said, adding that China will continue to pursue communication with the U.S. on this matter at the working group level.