TMTPost -- China called on the United States to make policy decision to Chinese industrial capacity  in a pragmatic way in reponse to latest concerns conveyed by U.S. Treasury Secretary Janet Yellen.

Credit：Xinhua News Agency

China provided a full and rational response to the issue of industrial capacity during the meetings and talks with Yellen, Chinese Vice Finance Minister Liao Min replied a question about the concern Yellen expressed in her six-day visit to China. The issue of industrial capacity should be dived into by upholding the principles of market economy and the law of value, Liao told reporters during a press briefing on Yellen’s visit on Monday. "The so-called 'overcapacity' is the manifestation of the market mechanism that plays its role. The balance between supply and demand is relative, while imbalance is often the norm," said Liao. The official pointed out overcapacity appeared in Western countries including the United States many times in history, and on such cases, solution mainly depends on the market adjusting itself according to the law of value.

Liao said that the industrial capacity issue should also be analyzed from the perspectives of both the global division of labor and the real situations of the global market. Taking an instance of the new energy vehicle (NEV) sector, Liao said the current production capacity is “far from meeting the market demand, especially the potential demand for new energy products in many developing countries.” Global demand for NEVs will reach 45 million units in 2030, 4.5 times that of 2022, and global demand for new photovoltaic capacity will reach 820 GW, about four times that of 2022, Liao cited estimates by the International Energy Agency (IEA), a Paris-based intergovernmental organisation which provides policy recommendations, analysis and data on the global energy sector.

China's new energy industry has now gained a competitive advantage rooted in the country's super-large market, a complete industrial system and abundant human resources following decades of rapid development, and such advantage is inseparable from the huge investment in R&D and innovation and the unremitting spirit of entrepreneurs, Liao noted. He said Chinese enterprises reduced production costs through technological innovation and improved the affordability of new energy products, which can not only enable China to meet its own carbon emission goals, but has also made positive contributions to the global response to climate change and green development. "And this must be objectively evaluated," he said.

Liao warned trade protection measures will not help in addressing the issue of industrial production capacity, and called for "pragmatic" and "rational" policy decisions. He added that is willing to strengthen communication and coordination with all parties to view and properly handle differences in a rational manner, on the basis of adhering to the principle of marketization.

In her speech delivered at a press conference about her trip to China the same day, Yellen said she raised concern over industrial overcapacity in the trip. “China is now simply too large for the rest of the world to absorb this enormous capacity,” Yellen said. “Actions taken by the PRC today can shift world prices. And when the global market is flooded by artificially cheap Chinese products, the viability of American and other foreign firms is put into question.” She said the concerns will not be resolved in short run, but exchanges will provide a dedicated structure for U.S. to raise our concerns about China’s imbalances and overcapacity, and U.S. intends to underscore the need for a shift in policy by China during these talks.