Debunking the 'Excess Capacity' Myth: Embracing the China Opportunity 2.0 for a Shared Future
Chinese Consul General Ren Faqiang rejects claims that China’s trade surplus reflects harmful overcapacity, arguing that its manufacturing and consumer markets create opportunities for developing countries.
Over the past decade, China's economy has experienced steady and sound development, contributing significantly to global growth. However, recent concerns about China's "Excess Capacity" have been raised, suggesting that China's trade surplus disrupts global markets. These claims misrepresent the essence of China's economic growth and the nation's commitment to global free trade.
There is no universally accepted definition of "Excess Capacity," and major international organizations have not set one. Economists approach this complex concept from both macro and micro perspectives. At the macro level, excess capacity occurs when production capacity significantly exceeds total effective market demand. At the micro level, it refers to a situation where firms produce less than the optimal level due to monopolistic competition.
Economies often experience excess capacity during economic cycles. The criteria for determining excess capacity vary across countries and sectors, and it is a dynamic phenomenon in the market economy. As market forces adjust, supply and demand balance towards a new equilibrium.
China's industrial enterprises have a capacity utilisation rate of 74.4% for large-scale enterprises, with higher rates in high-tech manufacturing and strategic emerging industries. Lower utilisation in traditional sectors is due to structural adjustment and green transition, which are part of industrial upgrading. Claims that China's inadequate domestic demand creates excess capacity are unfounded, as trade surplus results from global division of labor and supply-demand patterns.
Domestic demand has consistently driven China's growth, accounting for 93% of the country's economic growth from 2013 to 2024. China is the world's largest consumer market, with total retail sales of consumer goods reaching 1.7 times that of the U.S. in 2025. China's development brings opportunities rather than shocks to the world, providing affordable goods, enabling technological access, and strengthening global industrial supply chains.
Written by urgent.news from IOL's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
