{"id":15008,"date":"2024-12-05T06:30:00","date_gmt":"2024-12-05T06:30:00","guid":{"rendered":"https:\/\/focus.cbbc.org\/?p=15008"},"modified":"2025-04-23T08:55:44","modified_gmt":"2025-04-23T08:55:44","slug":"how-can-chinas-green-overcapacity-benefit-the-global-south","status":"publish","type":"post","link":"https:\/\/focus.cbbc.org\/how-can-chinas-green-overcapacity-benefit-the-global-south\/","title":{"rendered":"How can China’s green ‘overcapacity’ benefit the Global South?"},"content":{"rendered":"\n

While the US and EU impose tariffs in response to China\u2019s so-called green overcapacity, some developing economies see opportunities to benefit, writes Xie Ruohan for China Dialogue<\/h2>\n\n\n\n

\u201cOvercapacity\u201d is a word that has dominated the global political agenda this year. In an April visit to China, US Treasury Secretary Janet Yellen raised<\/a> \u2013 both privately and publicly \u2013 the Chinese economy\u2019s \u201cimbalances and overcapacity\u201d. Yellen expressed worries that this overcapacity could harm US industries. A particular focus of attention on the overcapacity debate has been China\u2019s \u201cnew three\u201d sectors of solar power, electric vehicles (EVs) and lithium batteries \u2013 products that are also central to China\u2019s and the world\u2019s low-carbon energy transition.<\/p>\n\n\n\n

Analysts say that EVs are expected to face a further setback<\/a> under the second term of US president-elect Donald Trump, whose transition team is planning to cut EV tax credits and further increase tariffs on Chinese goods.<\/p>\n\n\n\n

But not everyone agrees with the characterisation of these sectors as experiencing overcapacity. And not everyone thinks these \u201cimbalances\u201d are a bad thing. Some argue China\u2019s huge production capacity in low-carbon sectors could offer a unique opportunity to accelerate the global energy transition, particularly in the Global South.<\/p>\n\n\n

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Understanding overcapacity<\/h4>\n\n\n\n

Simply put, overcapacity occurs when a sector\u2019s production exceeds market demand. This imbalance can lead to lower-priced exports and unfair trade. It has implications for companies in other countries, which may be forced to downscale or close if outcompeted by low-priced goods, leading to job losses.<\/p>\n\n\n\n

The US and EU have cited these negative consequences as a justification for the tariffs they have imposed on China\u2019s \u201cnew three\u201d goods. In May, the US announced trade tariffs of 100% on Chinese-manufactured EVs, 25% on lithium-ion batteries and 50% on solar cells. In July, the EU announced similar measures on Chinese EVs, a measure formalised at the beginning of October with tariffs<\/a> of up to 45%.<\/p>\n\n\n\n

US and European officials also point to what they call \u201cunfair\u201d subsidies from the Chinese government that have boosted the country\u2019s production and global competitiveness. According to an April report<\/a> by the Kiel Institute, subsidies for green tech companies in China surged in 2022, with EV giant BYD receiving EUR 2.1 billion \u2013 nearly 10 times the EUR 220 million provided two years earlier.<\/p>\n\n\n\n

According to the International Energy Agency (IEA), China is responsible for three quarters of all lithium-ion battery production, which is crucial in the manufacturing of EV cars. China also produces over 80% of the world\u2019s solar panels, with exports increasing by 34% in the first half of 2023.<\/p>\n\n\n\n