One of the biggest issues facing the global economy today is China’s overcapacity. While China is not always explicitly named, this issue is frequently discussed at major international conferences. In May 2024, the joint statement from the Group of Seven (G7) finance ministers and central bank governors meeting in Banff, Canada, also addressed this topic.
In the 1980s, China promoted its Reform and Opening-Up policy and accelerated export-driven growth. After joining the World Trade Organization (WTO) in 2001, China’s exports surged, and by 2009 it overtook Germany to become the world’s top exporter.
Initially, the main exports were apparel, furniture, and home appliances—products of labor-intensive industries, commonly known as the “Old Three.”
In recent years, electric vehicles (EVs), lithium-ion batteries, and solar power products (the so-called “New Three”) have become the main drivers. According to the International Energy Agency (IEA), China now holds an 80–90% global market share in various segments of solar-related products.
These industrial policies are also a source of competitiveness. The central government designates key industries, and local governments actively support them with subsidies and incentives. Since 2009, purchase subsidies for EVs have been introduced, leading to increased competition and company entries. The number of new energy vehicle manufacturers once reached about 500, but with ongoing consolidation, only around 10% remain today.
The issue of China’s overcapacity will continue to have a major impact on the global economy and international trade. In particular, the growing share of the “New Three” sectors, government policy responses, and intensified competition will remain in focus. The future direction of each country’s industrial policy and international rules will also be crucial.
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This article discusses how China’s excess production capacity impacts the global economy, with a particular focus on the rise of new industries such as EVs, lithium-ion batteries, and solar power. Please note that circumstances may change due to unexpected economic developments or policy shifts; for the latest insights and analysis, refer also to trusted expert media sources.
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