What fuels global trade imbalances: China’s overcapacity or America’s failure to adapt?
China’s industrial overcapacity should not be singled out for blame amid trade imbalances, as economies worldwide are struggling to adapt to shifts in the global economy, contributing to mounting pressures, a prominent Chinese scholar said in comments directed at the United States. “The reason why o
By Sylvia Ma
China’s industrial overcapacity should not be singled out for blame amid trade imbalances, as economies worldwide are struggling to adapt to shifts in the global economy, contributing to mounting pressures, a prominent Chinese scholar said in comments directed at the United States.
“The reason why our imbalance is becoming a bigger problem is that the rest of the world is having a bigger problem in adjusting the economic structure,” said Huang Yiping, dean of Peking University’s National School of Development and an adviser to China’s central bank, on Tuesday.
Speaking at the World Economic Forum’s annual meeting in Dalian, Huang pointed to the US, arguing that Washington’s complaints over Chinese exports hurting manufacturing jobs had overlooked America’s deeper constraints in managing the impact of trade and globalisation.
Discussions of global imbalances featured prominently at the gathering, also known as Summer Davos, as China’s record trade surplus fuels concerns that Beijing’s industrial policy is generating excess capacity that is spilling over into global markets.
Huang said Beijing had made progress in reducing external imbalances, with its current-account surplus narrowing from nearly 10 per cent of gross domestic product in 2007 to about 3.7 per cent in recent years. But he acknowledged that more aggressive measures were needed to boost consumption, which remains well below global averages.
“How to work together with the rest of the world is a challenge we face, not just by China, but also by other economic partners,” he said.
Economists at the forum also debated whether China’s green manufacturing capacity should be viewed as a distortion or as a potential tool to help countries accelerate their energy transitions. The clean energy sector has become central to criticisms of Beijing’s industrial policy, but some participants argued the country’s low-cost technologies should be seen as an opportunity.
Elizabeth Thurbon, a professor of international political economy at the University of New South Wales, said it was important to look beyond manufacturing and consider how Chinese products could be used to strengthen economic and environmental security.
“We can think about using China’s very cheap solar panels to create very cheap renewable energy in our own countries, and then use that cheap energy to power our industrial processes,” she said on the sidelines of the forum.
“The world is facing a climate crisis, so until there are solar panels everywhere … the availability of cheap products in the environmental space is cause to celebrate as well as cause to be concerned.”
Huang expressed a similar view, arguing China’s green manufacturing capacity could be deployed to accelerate energy transitions across the Global South.
“Maybe China should do something a little bit like the Marshall Plan,” he said, suggesting a combination of official aid and market-based investment to help developing countries build out their green energy sectors.