China's development of new energy industry benefits the world (People's Daily)

In the context of economic globalization, the issue of production capacity should be viewed in accordance with market economy principles and value laws. Simply equating China's exports of new energy products with "overcapacity" does not conform to economic laws and comparative advantage principles, and it is even less advisable to use the name "overcapacity" to protect trade.

Capacity issues are inevitable in a market economy. In the dynamic balance of supply and demand changes, the utilization rate of production capacity is constantly changing. Under market economy conditions, moderate supply exceeding demand is a prerequisite for the market competition mechanism to play a role, which is conducive to regulating supply and demand, promoting technological progress and management innovation. In the context of economic globalization, the issue of production capacity should be viewed in accordance with market economy principles and value laws.

The development of China's new energy industry is in line with the overall direction of global green and low-carbon transformation. The export of China's new energy products is the result of open competition in the tide of economic globalization, and has made tremendous contributions to the global response to climate change and green and low-carbon transformation. Simply equating China's exports of new energy products with "overcapacity" does not conform to economic laws and comparative advantage principles, and it is even less advisable to use the name "overcapacity" to protect trade. With the deepening development of economic globalization, we must respect the objective laws and realities of international industrial division of labor, strengthen international exchanges and cooperation, promote investment and trade liberalization and facilitation, expand global effective demand, form a complementary and mutually beneficial industrial division of labor pattern, and better meet the needs of the international market.

Understanding Capacity Issues from Economic and Value Laws

Under market economy conditions, producers usually produce according to market demand. The competition law of "fast fish eat slow fish" in the market economy will motivate enterprises to continuously improve production efficiency to reduce product costs and prices, expand production scale to meet potential market demand and obtain higher profits, and eliminate inefficient production capacity in this process. This is a necessary process and result for the economic and value laws to play a role.

The supply and demand of the market are a dynamic equilibrium process. The supply and demand in a market economy generally go through a process of "excess balance re excess re balance". Under conditions of full market competition, due to information asymmetry and corporate development strategies, capacity adjustments and demand changes often do not synchronize. Supply and demand balance is relative, and imbalance is universal. Local supply and demand issues are not contradictory to the overall dynamic balance. From the perspective of industrial development laws, emerging industries with fast development speed and good market expectations will experience a surge in investment and capacity expansion after completing the initial stage of technology accumulation and market cultivation. In this process, there may be a coexistence of insufficient supply of advanced production capacity and surplus of backward production capacity, but this cannot indicate that the entire industry is overcapacity. In addition, some industries with obvious seasonality, such as some agricultural product processing industries, generally do not have high capacity utilization rates. In fact, moderate production capacity exceeding demand means that there is benign competition in the market, which will stimulate enterprises to increase R&D investment, improve product quality, reduce costs, strengthen management, improve services and other measures, produce marketable goods and continuously enhance competitive advantages, promote industry transformation and upgrading, and high-quality development.

In the context of economic globalization, the issue of production capacity should be compared to the demand of the world market. Under the conditions of an open market economy, countries participate in international division of labor based on their comparative advantages, forming their own different industrial structures and production capacity scales, and sharing the benefits of specialized division of labor through international trade sharing of "buying the world and selling the world". This not only improves the efficiency of global resource allocation, but also enhances the well-being of people in various countries, which is the result of the continuous deepening of international division of labor and fair competition in the global market. For example, some countries provide high-end chips, key components, and other products to the world, some provide raw materials, and some provide energy and resources, promoting mutual exchange and win-win cooperation. In this situation, a country's production capacity exceeds the domestic market demand, which is a natural phenomenon of international division of labor based on comparative advantage in economic globalization. It is one of the manifestations of the role of market mechanisms, not the so-called "overcapacity". If countries only allocate production capacity based on their own markets, international trade cannot be discussed. This not only violates the basic logic of economic laws and international division of labor, but also brings huge losses to global economic development and the well-being of people in all countries.

China's new energy industry represents advanced production capacity

China is a responsible developing country. In order to effectively address the climate change challenges faced by humanity, China actively grasps the overall direction of global green and low-carbon transformation, implements a series of strategies, measures, and actions to address climate change, participates in global climate governance, is committed to sustainable development, and promotes harmonious coexistence between humans and nature.

The development of China's new energy industry is conducive to promoting global green and low-carbon transformation. After years of development, China has become the world's largest country in new energy equipment and utilization. According to data released by the International Energy Agency, in 2023, the world added 510 million kilowatts of renewable energy, with China contributing more than half. At present, China's photovoltaic and wind power products have been exported to more than 200 countries and regions around the world, providing high-quality green products for the people of all countries. In 2022, China's renewable energy generation and exported wind and photovoltaic products contributed a total emission reduction of over 2.8 billion tons of carbon dioxide equivalent, accounting for approximately 41% of the global renewable energy converted carbon reduction during the same period. From the perspective of development prospects, green and low-carbon is the trend of global development. According to calculations from the International Energy Agency, in order to achieve carbon neutrality goals, the global demand for new energy vehicles will reach 45 million by 2030, which is about three times the global sales in 2023 and about five times the production in China; The global demand for power batteries will reach 3500 GWh by 2030, which is more than four times the global shipment volume in 2023 and more than five times the production in China. China's green technology and products have obvious positive externalities and are advanced production capacity required for global energy transformation and green development. They will make greater contributions to global climate change response and achieving sustainable development goals.

The competitive advantage of China's new energy industry is the result of market-oriented competition. Chinese new energy products have competitiveness in the international market, mainly due to a complete industrial and supply chain, continuous R&D investment, optimized process management, significant economies of scale, and sufficient market competition. It is a reflection of the theory of comparative advantage in economics and the result of global division of labor and market competition. Since 2000, China's R&D investment has increased by an average of 14.2% per year, driving the industry towards high-end, intelligent, and green development. In 2023, China's mass production of advanced photovoltaic cells achieved a conversion efficiency of 25.5%. Megawatt level wind turbines have formed multiple mature technological routes that have reached international advanced levels. The power battery for new energy vehicles ranks among the top in the world in terms of technical indicators such as battery energy density, lifespan, and safety. Especially, China has effectively leveraged its advantage in the domestic large-scale market, which has greatly improved the technological and economic level and product cost-effectiveness of its new energy industry after experiencing full competition in the domestic market. Ultimately, it has formed a clear competitive advantage in the international market, winning widespread praise and recognition from consumers from different countries and levels.

There is no so-called "dumping" in the export of new energy products from China. Dumping refers to the practice of exporting products to foreign countries at a price lower than cost, but there is no low price "dumping" in the export of new energy products from China. In terms of price, China's new energy products have a high cost-effectiveness and obvious comparative advantages. The price of exported new energy vehicles is lower than that of similar local models, but still higher than their domestic selling prices. Overall, they are profitable. In terms of proportion, in 2023, the proportion of China's new energy vehicle exports to production was only 12.5%, significantly lower than countries such as Germany, Japan, and South Korea.

Overall, China's new energy industry has honed its true capabilities in open competition, representing advanced production capacity. It not only enriches global supply and alleviates global inflationary pressures, but also makes significant contributions to global response to climate change and green transformation. From both a comparative advantage and a global market demand perspective, there is no issue of "overcapacity".

Promoting global economic development requires global cooperation

The essence of hyping up "overcapacity" is that a few countries, represented by the United States, use the name of "overcapacity" to protect trade, seek a more favorable competitive position and market advantage for their own country, and curb the development momentum of emerging industries in other countries.

The world today is a community with a shared future of prosperity and loss. Openness, inclusivity, and win-win cooperation are the only correct choices. Engaging in beggar thy neighbor and zero sum games will not contribute to the development of the world economy. The main problem currently facing the world is not overcapacity, but insufficient effective demand and slowing growth. The latest Global Economic Outlook released by the World Bank predicts that the global economic growth rate will further slow down in 2024; The International Monetary Fund (IMF) predicts that the world economy will grow by 3.2% this year, significantly lower than the average level of 3.8% from 2000 to 2019. The anti globalization and trade protectionism have brought obstacles and obstacles to the global economic cycle, resulting in a shrinking demand side, redundant construction on the supply side, and a decrease in capacity utilization, which affects the efficiency and sustained healthy development of the global economy.

Currently, the global industrial system and supply chain are showing a trend of diversified layout, regional cooperation, green transformation, and accelerated digitization. This is determined by the laws of economic development and is a historical trend that is not subject to human will. Only by actively participating in international division of labor, integrating more effectively into global industrial chains, supply chains, and value chains, and actively expanding external exchanges and cooperation, can we share the dividends of economic globalization.

Looking ahead to the future, the trend of economic globalization will not change, and the aspirations of people around the world for a better life and the demand for cost-effective products will not change. Only free trade and full competition can form the optimal solution to the global production capacity pattern. Countries should strengthen communication and dialogue, deepen cooperation, and establish mechanisms for strategic alignment, policy coordination, and information sharing. We must adhere to the correct direction of economic globalization, firmly promote trade and investment liberalization and facilitation, fully respect economic laws and objective laws of international division of labor in industries, leverage the comparative advantages of various countries, promote deep cooperation in industrial and supply chains, expand the cake of common interests, and inject stable forces into the recovery and growth of the world economy and the response to climate change.

(Written by Huang Hanquan, Sheng Chaoxun, Rongchen, Wu Di)

People's Daily (June 5th, 2024, 9th edition)