China offers ‘value for money’: minister rejects US overcapacity claims at G20

Global demand for new energy cars will be 45 million to 75 million units by then, far exceeding the world’s current supply capacity, he added, citing estimates by the International Energy Agency.

China is facing rising trade barriers in developed economies such as the United States and European Union, which have been complaining about the excess output and its impact on their industrial sectors and companies.

The EU is moving forward with tariffs on Chinese electric cars, while Republican candidate Donald Trump has threatened to impose duties of 50 per cent or more on imports of Chinese goods if he wins November’s presidential election.

Some developing nations, including Brazil and Turkey have also placed tariffs on Chinese products including steel and cars, though they have been less vocal in criticising Beijing’s industrial policy.

While China pays attention to the concerns of major economies about overcapacity, it too is concerned by trade threats like tariffs, Liao said.

“We should communicate in a candid manner with respect to rules of market economy and true facts.”

The differing approaches to China by rich nations compared with those from the Global South were evident at the Group of 20 meetings.

Yellen blasted China’s economic strategy as “a threat to the viability of firms and workers around the world”, while the president of Bundesbank, Joachim Nagel, urged Brazil to sustain its relationships with the West instead of betting exclusively on China to foster economic growth.

The Indian government’s chief economic adviser, V. Anantha Nageswaran, said the topic of China’s over-manufacturing was not brought up during any of his delegation’s bilateral talks, though he acknowledged it was an “issue” for his country.

Brazilian Finance Minister Fernando Haddad said that while the response from some countries to China’s exports was an “understandable reaction”, it was not sustainable in the long run.

Liao said government subsidies were not the main reason that Chinese industries such as the renewable energy sector had gained competitive advantages. More important factors were years of corporate investment in research and development, entrepreneurship and technological innovation.

“China’s reform and opening-up experience over the past more than 40 years has told us not a single industry can become a globally competitive sector [by] simply relying on government support,” he said.

Liao also argued that some countries were left behind in terms of developing EVs because they enjoyed advantages in the conventional auto sector and therefore did not shift their focus onto the emerging industry.

In contrast, China had to seek growth in new sectors like EVs due to a lack of advantages in the traditional car market.

Demand-supply disequilibrium was only natural for any market economy, Liao said, partly because companies made their own investment decisions and they did so for the long run expecting to meet higher demand. Market forces would show if they had made the right decisions or not, he added.

Large flows of capital funds into new industries was also not rare, he said, citing previous investment frenzies into sectors like information technology, shale gas and biopharmaceuticals, that resulted in “periodical” excess capacity in developed countries.