China said on Thursday that U.S. and European assertions of excess capacity were "naked trade protectionism" and that efforts to constrain new energy exports from the World's No.2 economy would frustrate global efforts to tackle climate change.

Growing alarm over Chinese industrial overcapacity flooding the European Union with cheap products is opening a new front in the West's trade war with Beijing, which kicked off with Washington's import tariffs in 2018.


Is there a reason why countries in the Global South don't complain about Chinese overcapacity? There has been growing assertions and accusations in the West that China has excess capacity and they need to address this overcapacity issue, but I don't see the same things being said in the Global South countries. What are the reasons for this discrepancy?


5 Answers 5


The question is flawed because its premise is outright wrong.

Many countries of the "Global South" do complain about Chinese overcapacity, and they've been retaliating with anti-dumping investigations and protectionist trade restrictions—usually on raw materials such as steel.

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    +1 both for a valuable insight and for sourcing your claim
    – codeMonkey
    Commented Jun 14 at 13:04

Countries in the Global South usually have very little industrial capacity, by definition. They don't make cars of their own, instead they use these 30 years old Toyotas if they have a car at all.

So they don't care about overcapacity and indeed are happy to get Chinese stuff at a discount.

First World countries still have significant industrial capacity and their own car makers who they feel the Chinese are trying to outsell. Hence the protectionist measures.

  • 1
    I think the original quote refers more to renewable energy technology like solar panels than (electric) cars but the arguement is exactly the same.
    – quarague
    Commented Jun 13 at 6:09
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    Brazil and India has a lot of industrial capacity. India has higher manufacturing output than France, Italy, or the UK, and a thriving high-tech sector. Brazil is the world's 6th-largest nation in aerospace exports.
    – Stuart F
    Commented Jun 13 at 12:37
  • Brazil and India are not Global South, they'r BRIC. Global South is DRC and Venezuela.
    – alamar
    Commented Jun 13 at 16:08
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    @alamar - Like "the West," it's one of those vague and misleadingly geographic terms that people cannot seem to shake despite not being able to agree on what it means. Prominent politicians in Brazil, China and India have all described the term as applying to their countries, even as others (like you) claim that it does not. It wouldn't even shock me if some politician in Russia had said the same, never mind that one cannot get further north. But that's what happens when a term that was created to describe gross geographic disparities becomes a definition.
    – Obie 2.0
    Commented Jun 13 at 17:40
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    @StuartF India also has over 20 times the population of UK, France or Italy. So having a higher absolute output doesn't tell you much.
    – Servaes
    Commented Jun 13 at 17:56

"Over Capacity" is a Play at Future Monopoly

The main accusation here is that China is providing large state subsidies to EV and other Green industries in order to capture the market.

The Chinese government is taking a loss by using large amounts of tax dollars to support these industries. But if Green companies abroad are unable to compete with Chinese companies and go out of business, then the PRC government can recoup the losses later when the Chinese companies have a global monopoly, jack up prices, and generate huge profits.

This is more of an issue for US and Europe than the Global South for two reasons:

  1. Existing Manufacturers: The West has an existing manufacturing base that is being undercut by these practices. Right now most of the best-selling cars in the world are from Industrialized nations, and comparatively few major car companies are headquartered in the Global South.
  2. Planning Ahead: China's ambition to gain a Monopoly in Green Tech is a years long gamble. China has been providing these subsidies for years, and must continue to provide them into the future to get the payout it wants. The Global South could take action to prevent this outcome, but putting taxes on Chinese companies raises prices at home when the domestic market desperately needs cheap goods. Not to mention the risk of PRC retaliation raising prices in other sectors of the economy. So it may be in the Global South's long term interest to prevent a PRC Monopoly, but taking action to prevent it could cause a lot of pain in the short term.

This is specifically targeted at markets that are rapidly changing (Solar, EVs, etc) because the incumbent advantage is lower. Many Western brands have long histories producing high quality ICE cars, but an EV is so different that much of that institutional knowledge is worthless. This provides an opportunity for the PRC to re-align the industry in ways that benefits China at the rest of the world's expense.


Disclaimer: not an economist.

See Why is it a problem if China is exporting "too many clean-energy goods"?

If you believe the answer to that question, in mainstream economics Chinese overcapacity it is not a problem, in fact it is actively desirable, and the reasons for the Western complaints stem from politics. In particular, if Chinese overcapacity leads to them exporting cheap goods, then people in the US (and presumably Europe also) lose jobs to their Chinese competitors. Unemployment is bad, and furthermore, these disaffected people can vote you out.

Presumably countries in the Global South don't complain because they aren't producing a lot of these goods in the first place, hence they lose fewer jobs, hence they have no reason to quarrel with mainstream economics.

  • 8
    There are other reasons than unemployment, notably keeping a domestic production. Major powers do not want to become too reliant on China for any one product, so they'd rather keep their own domestic industry afloat, which is difficult when it's significantly undercut by China... and requires protectionist measures. Commented Jun 13 at 10:18
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    India, Brazil, Mexico, and Thailand are all in the world's top-ten car producers so claiming they don't produce much is untrue.
    – Stuart F
    Commented Jun 13 at 12:44
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    @StuartF Part of the complexity of the problem is that Mexico's car production is mostly foreign, not local. In that the cars they produce are not Mexican owned. Raw production numbers will tell a misleading story. Foreign investment into the Global South doesn't equate to the country having that capacity on its own, even if they have the equipment.
    – David S
    Commented Jun 13 at 17:38
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    @Eugene Most EU countries are already on track to reach their decarbonization goals a few years ahead of time. This trajectory was already set before the very recent phenomenon of Chinese overcapacity. Yes EU does rely on production in China, but at this point EU can manage these goals without China as well. Not familiar with the state of affairs in the US.
    – Servaes
    Commented Jun 13 at 19:06
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    @Eugene Western manufacturers once were more than a blip on the radar. For the climate it doesn't matter where something is produced (if standards are the same everywhere) so neither China nor the West or South help the climate more. It's just that Chinese workers earn and consume less than they could. If only they would enjoy life a bit more. Spend their money, ask for a payrise. Commented Jun 14 at 17:25

It is a little rich that the West is crying foul at China for over producing since the main economic mantra in the West is capitalism and making their economies competitive. To rephrase, Chinese industries are outcompeting the West. Whilst Western citizens would be no doubt happier to get cheaper goods this is not good news for their own industries. This is why they use tariffs to protect their industries and why this is called protectionism.

The global south are much poorer than the rich West and this also means they don't have much industry to speak of. So there is no need to protect by raising tariffs. Thus they're happy to get cheaper goods from China than they would from the West. From their view it's a win-win strategy: China gets to offload its excess capacity and they get cheaper goods.

  • 14
    IIRC the general western complaint in this case isn't that China is more competitive, but that they're using internal economic interventions to ensure their products are cheaper. Which means that if you're a country relying on laissez-faire capitalism you would have trouble competing. So the argument they use is that since the Chinese government is intervening to make their industries more competitive it's fine for them to do the same. To which extent this is actually true and to which extent it's political talk is a different question of course.
    – kenod
    Commented Jun 13 at 7:02
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    @kenod: Hmm, didn't the capitalist West intervene massively in the financial crash of 2007-08? Commented Jun 13 at 7:05
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    @MoziburUllah Pretty much. Laissez-faire capitalism is always endorsed by the countries who at that moment can make desirable goods at the best price. When they see themselves at the losing end of the deal, those principles go out of the window.
    – Rekesoft
    Commented Jun 13 at 7:47
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    @MoziburUllah We do though, since protectionism is one of the things that helps them stay more competitive. Limits on the influence of external companies helps local businesses grow faster, while artificial limits on internal consumption helps lower prices of goods and makes them cheaper to export.
    – kenod
    Commented Jun 13 at 8:13
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    @MoziburUllah Indeed, which is why standard economic thinking is that protectionist measures are a bad idea. The issue is that there's a Tragedy of the Commons effect, where if one country does it they gain an economic advantage to the detriment of others, so everyone is forced to do it, with all economies having issues in the end.
    – kenod
    Commented Jun 13 at 8:18

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