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China economy
OpinionChina Opinion
David Dodwell
David Dodwell

Inside Out | Western concerns about Chinese oversupplies are woefully misplaced

  • The West misunderstands China’s efforts at boosting innovation and satisfying domestic demand as seeking to undermine foreign competitors
  • While oversupply is a valid concern, a bigger problem is concentrated production among a small cluster of firms which US tariffs on China will not address

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A worker produces solar photovoltaic modules used for solar panels at a factory in Huaian, Jiangsu province, on September 5, 2023. Photo: AFP
David Dodwell
The Western narrative is clear: China is deliberately using subsidies to create massive oversupplies of everything from solar panels and wind turbines to semiconductors, batteries and electric vehicles that can then be dumped onto world markets, undermining foreign competitors and creating long-term dominance for China’s state-owned enterprises.
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The narrative is enticing, plausible and wrong. And it is being ruthlessly exploited to justify protectionism on a scale unprecedented since the 1930 Smoot-Hawley Act, which eventually imposed mountainous tariffs on more than 20,000 imported goods.

To be concerned about oversupplies in the global market is not unreasonable. Nor is it unreasonable to be concerned about the risks of becoming heavily reliant on a small number of suppliers in any strategic areas of an economy. But to misunderstand China’s strategic motivations is to misdiagnose the problem and prescribe the wrong solutions. Smoot-Hawley made matters worse, and Biden’s newly conceived blizzard of tariffs is likely to do the same.

China’s ambitions to recover its “proper” place in the world were always going to be problematic for those in the West who have benefited from their economic dominance.

With almost 18 per cent of the world’s population, around 19 per cent of global gross domestic product when adjusted for price differences, 14 per cent of world merchandise trade and more than 28 per cent of the world’s manufacturing output, simple arithmetic suggests to Beijing that it is not unreasonable to aspire to be among the top competitors in the most strategic sectors. How to get there without ruffling too many feathers is a challenge, nevertheless.

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China’s core recovery problem is its own awesome size. Coordinating policies across 27 provinces and autonomous regions, five of which are more populous than Germany, has always been a daunting challenge. Few outside China appear to properly recognise the implications.

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