China's First Comprehensive Response to Western Overcapacity Allegations
Today, the Chinese government held a press briefing to present its official position on the overcapacity issue by releasing a position paper titled “China’s Position on the So-called Excess Capacity Issue”
Overcapacity has long been one of the most contentious issues in China’s trade relations with both the European Union and the United States. In Washington and Brussels, the prevailing view is that China has continuously directed large amounts of capital into strategic manufacturing sectors through subsidies, policy lending, low-cost land and energy, government procurement, and local industrial policies. Because domestic demand is seen as insufficient to absorb the resulting output, the surplus is ultimately exported at low prices, putting pressure on manufacturing industries in other countries.
That said, the United States and the European Union do not frame the issue in exactly the same way. The United States primarily views it through the lens of macroeconomic imbalances, industrial security, and strategic competition with China. The European Union, by contrast, focuses more on demonstrating the existence of specific subsidies, import injury, and the legal basis for trade remedy measures.
I have participated in several discussions on China-Europe economic relations, involving both think tanks and industry representatives, and one thing has become increasingly clear to me: there remains a significant gap between Chinese and European perspectives on this issue.
European experts generally argue that the challenge has evolved beyond isolated trade disputes or individual industries into a structural conflict between two different economic models. In their view, China relies on exports and industrial upgrading to sustain economic growth, while Europe sees its own manufacturing base coming under sustained pressure, with implications for employment, industrial capacity, and political stability. As a result, Europe’s “de-risking” agenda is driven as much by domestic economic and political considerations as by geopolitics.
Many also argue that years of dialogue have failed to change the underlying dynamics, prompting the EU to rely increasingly on legal and industrial policy tools in an effort to encourage adjustments by China. With China’s technological upgrading accelerating, many in Europe believe that waiting longer would only further erode Europe’s industrial competitiveness.
China apparently has a very different view, as indicated by the word “so-called” being used in the title of the official position paper. Chinese experts generally argue that the China-EU trade imbalance is primarily the result of macroeconomic structures rather than unfair competition driven by subsidies. China has maintained a high savings rate for decades, while domestic investment has slowed in recent years, naturally producing current account surpluses and capital outflows.
They contend that China’s manufacturing competitiveness is rooted in its enormous domestic market, highly integrated supply chains, and industrial clusters—not simply in government support. In this view, attributing trade imbalances entirely to industrial policy misdiagnoses the problem and risks turning what should be addressed through macroeconomic adjustment into a trade conflict.
Some Chinese experts also question the methodologies used in Western studies on China’s overcapacity and subsidy levels, arguing that they rely on strong assumptions and that policies built on those estimates could face challenges both economically and under international trade rules.
I am not a trade economist, and it will be too difficult to take a position on this debate. My impression is that this is an extraordinarily complex issue that deserves much more research and discussion by international experts.
The position paper released by the Chinese government today is, from my personal view, a detailed response to many of the criticisms that the United States and Europe have made against China on this issue over the past several years. I would recommend that anyone following China trade policy—including policy watchers and trade lawyers—read it carefully.
One small but telling detail is the title of the position paper. The official English version is "China's Position on the So-called Excess Capacity Issue," rather than using the much more common Western term "overcapacity." This is unlikely to be accidental.
In U.S. and European policy discussions, “overcapacity” has become a loaded political term, implicitly accepting the premise that China suffers from a structural overcapacity problem. By choosing the more neutral phrase “excess capacity” and prefacing it with “so-called”, China seems to signal that it does not accept the Western framing of the debate.
You can download the full English text of China’s position paper here:
China’s Position on the So-called Excess Capacity Issue
The full English transcript (my own translation) of today’s press briefing is available here:
Opening Remarks
Jia Huili, Deputy Director-General of the News Bureau of the State Council Information Office and Spokesperson:
Good afternoon, ladies and gentlemen. Welcome to this press conference of the State Council Information Office.
Today, the Ministry of Commerce released the document China’s Position on the So-Called “Overcapacity” Issue. We are joined by Mr. Yan Dong, Vice Minister of Commerce, who will brief us on the document and answer questions of concern. Also attending today’s press conference are Mr. Lin Weilong, Director-General of the Policy Research Department of the Ministry of Commerce; Mr. Han Yong, Director-General of the Department of World Trade Organization Affairs; and Mr. He Shaojun, head of the Department of Foreign Trade.
First, I will give the floor to Mr. Yan Dong.
Introductory Statement
Yan Dong, Vice Minister of Commerce:
Thank you, Madam Moderator. Friends from the media, good afternoon.
As just mentioned, the Ministry of Commerce today released the document China’s Position on the So-Called “Overcapacity” Issue. I would like to take this opportunity to briefly introduce the background to its release and its main contents.
In recent years, global economic growth has lacked momentum. The international community has paid broad attention to global supply-demand balance and capacity issues, and there has been much discussion. In particular, some economies, out of concern over their own industrial competitiveness and market position, have politicized economic and trade issues, hyped up the so-called issue of Chinese “overcapacity,” and even deliberately confused concepts by linking industrial subsidies, trade surpluses, economic imbalances, and market competition with “overcapacity.” They have pushed narratives such as “China Shock 2.0” and used the so-called “overcapacity” issue as a pretext to implement all kinds of protectionist measures.
President Xi Jinping has pointed out that blowing out others’ lamps will not make oneself brighter, and blocking others’ paths will ultimately block one’s own. China believes that capacity issues should be viewed in a comprehensive, objective, and fair manner, and must not be used as a pretext for protectionism. Doing so will only disrupt the global economic and trade order and the stability of industrial and supply chains, aggravate contradictions and divisions, and create long-term risks for global economic growth. To clarify the facts and explain China’s views and position on issues related to the so-called “overcapacity,” we prepared this position paper.
The Chinese version of the document contains more than 10,000 Chinese characters, and an English version has also been released simultaneously on the website of the Ministry of Commerce. The full text consists of three parts: a preface, the main body, and a conclusion. The main body has four chapters.
Chapter One is A Comprehensive and Objective View of Global Capacity and the So-Called “Overcapacity.” This chapter reviews, from a historical perspective, the evolution of the global capacity landscape and explains that the gradual shift of the global industrial pattern from a single center to multiple centers is the result of international industrial division of labor. “Overcapacity” is a dynamic phenomenon in a market economy. Different parties understand the concept differently, and the situation in different economies and industries should be measured according to their stages and levels of development.
Chapter Two is China’s Position on Four Relationships Related to “Overcapacity.” It objectively analyzes the relationship between industrial subsidies, trade surpluses, economic imbalances, market competition, and “overcapacity,” emphasizing that there is no necessary connection between industrial subsidies and overcapacity, that more exports and larger surpluses do not equal overcapacity, that global economic imbalance is a historical norm with complex roots, and that market competition is an important safeguard for the optimization and adjustment of capacity.
Chapter Three is China’s Commitment to Building a Modern Industrial System Through Openness and Cooperation. This chapter focuses on China’s policy practices and future direction. It explains that the rapid development of China’s modern industries is driven by innovation, and that the steady and healthy operation of industry depends on deepening reform. It also makes clear that the development of China’s modern industries is not the so-called “China Shock 2.0,” but rather “China Opportunity 2.0.”
Chapter Four is Jointly Promoting an Open and Inclusive Global Industrial and Supply Chain Cooperation Landscape. This chapter presents China’s vision and proposals. It calls on the international community to shoulder responsibilities together and move toward one another, advocate mutual benefit and win-win outcomes, respect market rules, strengthen coordination of industrial policies, expand market openness, create cooperation opportunities, uphold multilateralism, and build a fairer and more equitable international economic order.
That is all for my introduction. My colleagues and I are now ready to take your questions. Thank you.
Jia Huili:
Thank you, Mr. Yan Dong, for the introduction. We will now move to questions. Please identify your media outlet before asking your question.
Questions and Answers
Reporter from The Beijing News, Shell Finance:
At present, countries hold different views on the issue of “overcapacity,” and international institutions also lack a unified definition. Evaluation criteria vary significantly and there are major differences of opinion. How should we understand this issue? Thank you.
Yan Dong:
I will invite Director-General Lin Weilong of the Policy Research Department to answer this question.
Lin Weilong, Director-General of the Policy Research Department, Ministry of Commerce:
Thank you for your question. As you just mentioned, the concept of “overcapacity” and related issues have long been disputed in the international community, and no broad consensus has been reached. I would like to explain this from three dimensions so that the issue can be understood in a more comprehensive, objective, and systematic way.
The first is the theoretical dimension. “Overcapacity” is a complex concept that needs to be understood in a specific economic context. Most economists explain it from both macro and micro perspectives. At the macro level, it refers to supply exceeding demand, with total production capacity clearly surpassing total demand. At the micro level, it refers to idle enterprise capacity, with factors such as monopolistic competition preventing the clearing of capacity and keeping output below its optimal state. “Overcapacity” is a dynamic phenomenon in a market economy. It is related both to changes in supply and demand and to the industrial life cycle, and it always exists in a dynamic cycle of balance, imbalance, and rebalancing. Balance is relative; imbalance is common.
The second is the historical dimension. The global center of capacity has undergone several major shifts along with industrial relocation. Since the First Industrial Revolution, factors of production around the world have accelerated their movement, and the United Kingdom and the United States successively became world industrial centers. In 1880, the United Kingdom’s share of global industrial output reached a peak of 22.9 percent; in 1953, the United States’ share reached as high as 44.7 percent. After World War II, the world experienced multiple waves of industrial transfer: from the United States to Europe, from Europe and the United States to Japan, then to East Asia and China, and now from parts of China to Southeast Asia and other regions. This has formed three major regional manufacturing centers in North America, Europe, and East Asia. China’s emergence as the “world’s factory” is the result of actively integrating into economic globalization and participating in international industrial division of labor, and it is an important component of the global manufacturing network.
The third is the practical dimension. Capacity utilization needs to be assessed in light of the realities of different countries and industries. Internationally, capacity utilization is commonly used to measure “overcapacity.” This indicator is the ratio of actual output to potential output. Reasonable ranges differ across economies, and there is no universally applicable global standard. The median capacity utilization rate in developed and fast-growing economies is usually between 75 percent and 80 percent, while in less developed countries it is generally between 50 percent and 64 percent. At the same time, capacity utilization differs greatly across industries. In some traditional industries, capacity utilization is clearly below the average level. In some countries, utilization in industries such as beverages and furniture is around 65 percent, while in rubber, chemicals, and plastics it is only 40 to 50 percent. Emerging industries tend to have relatively higher rates. In some countries, capacity utilization in computers and peripheral equipment reaches 83 percent, and in electrical equipment and components it reaches 86 percent. Looking at countries’ economic practice, capacity utilization is somewhat objective as a measure of the state of capacity use, but it should not be absolutized as a standard for judging whether different economies or industries have overcapacity.
In light of China’s actual development, industrial capacity utilization as a whole remains within a reasonable range. In 2025, the capacity utilization rate of above-designated-size industry was 74.4 percent. In fields such as high-tech manufacturing, high-end equipment manufacturing, and strategic emerging industries, capacity was used more fully. In some traditional industries, such as raw materials, utilization was temporarily lower, mainly because of adaptive adjustments brought about by structural transformation and green transition. This is a normal phenomenon in the process of industrial upgrading and quality improvement. Overall, China’s industry remains basically balanced in supply and demand and operates steadily.
Thank you.
Reporter from China News Service:
In recent years, there has been an international narrative that subsidies cause overcapacity. How does China view such statements? Also, what is the relationship between industrial subsidies and “overcapacity”? Thank you.
Yan Dong:
Thank you for your question. I will ask Director-General Han Yong of the WTO Affairs Department to answer.
Han Yong, Director-General of the Department of World Trade Organization Affairs, Ministry of Commerce:
Thank you for the question. At present, many countries formulate industrial policies tailored to their national conditions and industrial development needs. For example, they provide research and development subsidies for emerging industries and risk subsidies for agriculture. These are WTO-consistent industrial and trade policy tools available to members. Multiple reports by UNCTAD show that the number of industrial policies worldwide has been on the rise over the past five years, and that R&D subsidies, tax incentives, and low-interest loans have become internationally common approaches to supporting emerging industries. What needs to be emphasized here is that industrial subsidies are not a problem in themselves, nor is there any necessary connection between industrial subsidies and overcapacity. Reasonable and compliant subsidy policies can help correct market failures, advance technological innovation, protect the ecological environment, reduce poverty, and promote balanced development. They do not create the so-called “overcapacity.”
On the other hand, if protectionist measures are adopted and non-compliant industrial policies are introduced to shift burdens onto others and restrict competition, they will disrupt the global economic and trade order. The U.S. Inflation Reduction Act plans to provide $750 billion in various subsidies from 2022 to 2031, and subsidized electric vehicles must meet conditions such as being produced and sold locally or in North America, thereby excluding other countries and regions. In addition, according to incomplete statistics, the European Commission will provide more than 1.44 trillion euros in various subsidies between 2021 and 2030. The EU’s Industrial Accelerator Act proposes to directly link local content with fiscal support through an “EU-origin” requirement, creating serious investment barriers and institutional discrimination. Major powers are the leaders of global industrial development and should set an example by using subsidies reasonably on the basis of openness, fairness, and compliance, avoiding discriminatory subsidy policies and avoiding artificial interference in the global layout of industrial and supply chains.
China has always strictly observed WTO rules and is committed to building and improving a fiscal subsidy system consistent with international practices. Over the years, China has taken multiple measures to continuously improve the compliance, scientific basis, and transparency of subsidies, and has constantly standardized and refined related policies. It has cleaned up and regulated some improper local subsidies and is studying the establishment of a unified negative list management mechanism for local fiscal subsidies. China fulfills its WTO transparency obligations in a timely and comprehensive manner, and its subsidy notifications cover the entire country. Chinese subsidies are mainly directed to areas such as scientific research and development, commercialization of technology, and market consumption. More often, China uses market-based and guiding means such as public services, technical standards, and skills training, with重点 support for technological innovation, small and medium-sized enterprises, green development, and energy conservation. China’s subsidies apply equally to all kinds of market entities. Foreign-invested enterprises actively participate and benefit on an equal footing.
Development is an eternal theme of human society. All countries should focus on making the global development pie bigger and introduce industrial policies in a reasonable and compliant manner, rather than using them as tools to restrain other countries’ development. China is willing to hold discussions with all parties under the WTO framework on relevant industrial policies, jointly regulate related practices, and promote the updating of multilateral rules.
Thank you.
Reporter from Bloomberg News:
Does China plan to address trade partners’ concerns about “overcapacity” and the displacement of domestic industries by low-cost Chinese exports? If so, what specific measures will it take? And do you expect the trade surplus to reach another record high this year? Thank you.
Yan Dong:
This question concerns trade, so I will ask Mr. He Shaojun from the Department of Foreign Trade to answer.
He Shaojun, head of the Department of Foreign Trade, Ministry of Commerce:
Thank you for your question. Trade surplus is a topic of broad concern, and I would like to take this opportunity to share some views from several angles.
First, a surplus reflects profound changes in the international division of labor. Looking back at the history of global economic development, countries generally went through stages of trade surplus during industrialization. Manufacturing powers such as the United Kingdom, the United States, Japan, and Germany all maintained trade surpluses for long periods. At the product level, 80 percent of U.S. chips are exported, and about two-thirds of commercial aircraft delivered by Boeing are sold to customers outside North America. In 2025, the European Union recorded surpluses of $92.2 billion in automobiles, $214.6 billion in pharmaceuticals, and $11.6 billion in cosmetics. More exports and larger surpluses do not equal overcapacity. China’s trade surplus reflects the completeness and efficiency of its industrial system and is an objective result of changes in the global division of labor and trade patterns.
Second, Chinese products meet the production and daily-life needs of countries around the world. Consumer goods produced in China, such as computers, mobile phones, furniture, clothing, and toys, provide consumers in various countries with more choices, lower consumption costs, and help buffer inflation risks. China’s exports of production equipment and intermediate goods strongly support the industrialization of its trade partners. For example, China supplies more than 80 percent of the world’s photovoltaic modules and 70 percent of wind power equipment, providing important support for the green transition of its trade partners. Foreign-invested enterprises contribute 16 percent of China’s surplus and have also earned substantial returns on their investment. This vividly shows that while the surplus is recorded in China, the benefits are shared by all parties.
Third, from the perspective of the overall balance of payments, although China runs a sizeable surplus in trade in goods, it has deficits in trade in services and in the capital and financial account. The current account surplus accounts for about 3.7 percent of GDP, which is within the internationally recognized reasonable range, and there is no significant external imbalance.
I would like to stress that China never deliberately pursues a trade surplus. We will continue to actively promote balanced development of imports and exports, continue opening our market to the world, and firmly expand imports. In the first half of this year, China’s import growth in goods trade was 22.1 percent, significantly faster than export growth. China remains the world’s second-largest import market, and its enormous market demand provides strong momentum for the development of its trading partners. Since last year in particular, we have built the “Export to China” brand and plan to hold more than 100 import promotion activities every year, with the aim of sharing China’s new development opportunities with the world. At many overseas “Export to China” events, Chinese enterprises have signed letters of intent with local companies, broadened sourcing channels for imports, and created more convenient pathways for companies from various countries to enter the Chinese market. These efforts have received positive responses and have generated mutually beneficial cooperation.
Going forward, we will take more practical measures to expand imports and share with countries around the world the new opportunities created by China’s large market.
First, we will continue to expand the influence of the “Export to China” brand. Through a series of matchmaking events, exhibition linkages, and targeted procurement, we will further increase imports.
Second, we will continue to strengthen policy support. We will improve the facilitation of import trade, optimize the sources and structure of imported goods, and better meet the needs of industrial development and people’s aspirations for a better life.
Third, we will make full use of various promotion platforms. We will continue to host major exhibitions such as the China International Import Expo and the China International Consumer Products Expo, regularly organize import-trade fairs for featured CIIE products, and better leverage national demonstration zones for import trade promotion and innovation, so as to actively drive the import of high-quality goods and services from around the world.
Thank you.
Reporter from International Market News, United States:
Recently, some leaders from EU countries and institutions have expressed concerns that China’s currency is undervalued and gives Chinese exporters an unfair advantage. What is the Ministry of Commerce’s response? Looking ahead to the second half of this year, especially amid continued trade tensions and the broader economic backdrop, how does the Ministry view the outlook for China-EU trade? Thank you.
Yan Dong:
Director-General Lin Weilong from the Policy Research Department will answer this question.
Lin Weilong:
Thank you for your question. We have taken note of the relevant developments. In recent years, under the strategic guidance of the leaders of China and the EU, China-EU economic and trade relations have developed generally well. In the first half of this year, trade in goods between China and the EU increased by 14.2 percent year on year, reaching $447.88 billion. The two sides have huge potential for cooperation in services trade, scientific and technological innovation, and the green economy. This is both the result of deep interconnection and complementarity in China-EU industrial and supply chains, and a reflection of the broader trend of global digital and green transformation and the future development of China and Europe.
At the same time, the EU has recently continued to roll out trade restriction measures against China and to hype the so-called issue of the renminbi exchange rate. This lacks a factual basis and is not conducive to the stable development of China-EU economic and trade relations. China adheres to giving the market a decisive role in exchange-rate formation and maintains the renminbi exchange rate basically stable at an adaptive and equilibrium level. As a responsible major country, China does not seek competitive advantage through currency depreciation. Chinese manufacturing is internationally competitive, and there is no need to promote exports through an undervalued exchange rate.
China is not the source of the EU’s economic and trade problems, but a partner in solving them. Protectionism leads nowhere; cooperation for mutual benefit is the right path. At the end of last month, Minister of Commerce Wang Wentao and European Commissioner for Trade and Economic Security Maros Sefcovic jointly chaired the first meeting of the China-EU trade and investment consultation mechanism, and reached consensus on the new positioning of the relationship as one of “stable and balanced key trade partners.” China is willing to use this mechanism to strengthen dialogue and consultation with the EU, properly handle differences and frictions, promote practical cooperation, advance trade toward a more balanced direction, and foster the steady and sound development of China-EU economic and trade relations, thereby injecting more certainty and positive energy into the global economy.
Thank you.
Reporter from National Business Daily:
There are currently two narratives in the international community regarding China’s industrial development and technological innovation: one is “China Shock 2.0” and the other is “China Opportunity 2.0.” How should we view these two narratives? Is China’s industrial development ultimately a shock or an opportunity for the world? Thank you.
Yan Dong:
Thank you for your question. I will answer this one myself.
This is indeed a topic that has attracted a great deal of attention and discussion. Some countries have put forward the so-called “China Shock 2.0” narrative, slandering China’s industrial development as a threat to the monopoly position of Western countries and as squeezing the development space of countries in the Global South. This narrative does not conform to the facts and cannot stand up to scrutiny.
For more than a decade, China has been an important engine of world economic growth, contributing about 30 percent. By leveraging its market strengths, industrial development, and technological progress, China has provided the world with growing “market dividends,” “development dividends,” and “innovation dividends.” These dividends overlap and reinforce one another, bringing the world more development opportunities and broader room for growth, which is what more rational and objective voices in the international community call “China Opportunity 2.0.” This can be understood from four aspects.
First, China’s industrial development is a ballast stone for the stability of global industrial and supply chains. China has the world’s largest industrial manufacturing system, with the most complete range of categories and the most integrated system. It continues to provide all kinds of industrial manufactured products in an efficient manner, strongly supporting stable global supply and effectively offsetting localized supply gaps caused by protectionism, geopolitical conflicts, and other factors. This has demonstrated China’s strong resilience and sense of responsibility, enabling it to play the role of a stabilizing anchor and major hub in global industrial cooperation. China’s exports of high-quality and cost-effective production equipment and components have lowered entry barriers for developing countries’ manufacturing sectors. From 2012 to 2024, China exported more than $30 billion in textile machinery to developing countries, helping some countries in Southeast Asia and South Asia become important textile producers and exporters.
Second, China’s industrial development is a new engine for global innovation cooperation. China adheres to innovation-driven development and has forged an effective path in which technological innovation leads industrial innovation and industrial upgrading in turn accelerates technological iteration. With the support of Chinese manufacturing, any valuable technological achievement can quickly be transformed into a real product, making China an ideal testing ground for both “0-to-1” validation and “1-to-N” scaling of new products and services. China remains open in innovation, and its rapidly growing innovative companies have delivered several-fold, and in some cases several-dozen-fold, returns to investors from around the world. Many of China’s innovations, including large AI models, follow an open-source path and are widely welcomed by countries everywhere. Global cumulative downloads of open-source large models have surpassed 10 billion, enabling more countries, especially developing countries, to access and afford new technologies.
Third, China’s industrial development is a driving force for the global green transition. China is accelerating a comprehensive green transition and promoting green, low-carbon industrial development. By the end of the 15th Five-Year Plan period, the scale of China’s green industries is expected to exceed 20 trillion yuan. The rapid development of China’s green industries and the growing supply of new energy products have enriched global supply and strongly advanced the global low-carbon transition. According to a report by the International Renewable Energy Agency, over the past decade, the global levelized cost of electricity for wind and solar projects has fallen by more than 60 percent and 80 percent, respectively, and a large part of that is attributable to Chinese manufacturing and Chinese capacity. At present, with global energy tensions and artificial intelligence driving up electricity demand, the International Energy Agency predicts that by 2030 global electricity consumption by data centers will approach 1 trillion kilowatt-hours, of which 40 percent of the additional electricity demand will rely on renewable energy. China has clear scale and technological advantages in solar energy, energy storage, and electrification, and will be better positioned to meet future global demand for green energy and industrial development.
Fourth, China’s industrial development helps improve people’s well-being around the world. The rapid development of Chinese industry has provided the world with a rich supply of high-quality, highly efficient, and cost-effective products, offering consumers in all countries more stable and more diversified choices. Chinese manufacturing has improved living standards, reduced the cost of living, and eased global inflationary pressure. For example, Chinese air conditioners have recently sold well in Europe, helping local people stay cool during heat waves. A report by the European Central Bank estimates that if EU imports from China increase by 10 percent in 2026, the EU’s overall import prices would fall by 1.6 percent. China’s trade and investment have also had a stronger enabling effect on industrialization in developing countries. China has established more than 50,000 enterprises overseas, with outward investment stock exceeding $3 trillion, nearly 90 percent of which is located in developing economies. Through local production, local procurement, local hiring, supporting upstream and downstream industries, and connecting regional supply chains, Chinese-invested enterprises have brought a large number of projects in light industry, textiles, home appliances, and other sectors to fruition, while also driving the development of digital and green sectors. This has strengthened the contribution of exports to local value added in host countries. According to estimates by the Chinese Academy of Sciences, the value added in local exports driven by Chinese-invested enterprises in 24 developing economies increased from $24.4 billion in 2012 to $142.4 billion in 2025, nearly a fivefold increase. The so-called theory that China is squeezing others out is simply a new version of the “China threat” narrative. It is intended to undermine China’s cooperation with countries of the Global South and to shift historical and present responsibilities, rather than to genuinely help developing countries. Facts and data show clearly that China’s industrial development brings the world opportunities, not shocks; empowerment, not threats. It helps developing countries modernize and helps pave the way for their development.
Thank you.
Reporter from Yangguangwang, China National Radio, CMG:
In recent years, unilateralism and protectionism have been on the rise. Some economies have adopted discriminatory measures that undermine fair competition and disrupt global industrial division of labor and cooperation. How do you view the role of market competition in adjusting the global distribution of capacity, and how can the WTO play a better role in maintaining a fair international competitive environment? Thank you.
Yan Dong:
Thank you for your question. I will ask Director-General Han Yong to answer it.
Han Yong:
Thank you for the question. Market competition is an important safeguard for optimizing and adjusting capacity and for promoting healthy industrial development. Historically, every industrial revolution and technological transformation has been accompanied by a rise in capacity in related industries and even, in the short term, situations in which supply exceeded demand. In this process, enterprises invest and expand production in pursuit of profits and market share, while market competition drives them to reduce costs and improve efficiency, bringing technological progress and productivity gains. In that sense, market competition is the most effective mechanism for preventing disorderly expansion of capacity. The role of government should be to maintain competitive order and a fair environment, allowing the market to function more fully so that outdated capacity exits naturally through competition and dynamic balance between supply and demand is ultimately achieved. The WTO’s principle of fair competition and related rules have become widely accepted norms of behavior globally. All parties should uphold fair competition and reduce improper interference with global cooperation in capacity allocation.
China is actively fostering a first-class business environment characterized by fair competition. China has the largest number of market entities in the world. This huge number creates a fully competitive environment in which enterprises face direct challenges and compete on real strength, refining products and services in the survival-of-the-fittest process. McKinsey once described China as “the world’s toughest gym,” a place that has forged highly competitive companies. China’s 15th Five-Year Plan outline makes clear that it will deepen the development of a unified national market, remove barriers in factor acquisition, qualification recognition, tendering and bidding, and government procurement, fully implement national treatment for foreign-invested enterprises, and actively foster a first-class business environment that is market-oriented, law-based, and internationalized.
The multilateral trading system with the WTO at its core and rules at its foundation has played an important role in maintaining the stability of the global economic and trade order. Principles such as free trade, non-discrimination, and fair competition are deeply rooted and together form the underlying logic that keeps the global economic and trade order stable and predictable. At present, the multilateral trading system is under severe impact from unilateralism and protectionism, but multilateralism remains the first choice of the overwhelming majority of WTO members. According to WTO statistics, 72 percent of global trade is still conducted under the most-favored-nation principle. This fully demonstrates the value and resilience of the multilateral trading system’s basic principles, including fair competition. No one wants to return to a jungle world where the strong prey on the weak. In difficult times, international fairness and justice become all the more precious. China will work with all parties to firmly support the multilateral trading system, advance WTO reform, resolutely uphold the WTO’s basic principles and rules, and maintain a transparent, fair, and inclusive global economic and trade environment.
Thank you.
Reporter from the South China Morning Post:
The EU has recently proposed related trade defense instruments, and the United States has launched a Section 301 investigation targeting the capacity issue. How does the Ministry of Commerce comment on this? Given that domestic supply in related areas continues to exceed domestic demand, what measures is the Ministry taking to prevent export spillover effects from triggering more trade restrictions? Thank you.
Yan Dong:
Thank you for your question. Director-General Lin Weilong of the Policy Research Department will answer.
Lin Weilong:
Thank you for your question. As I understand it, your question actually contains three issues: trade measures by Europe and the United States, China’s domestic demand, and the export spillover effect and the resulting global economic imbalance.
Let me first address the question of the EU’s trade defense instruments and the U.S. Section 301 investigation into the capacity issue. China has repeatedly stated its position on both matters. The EU has continued to introduce protectionist measures against China, seriously undermining the confidence of Chinese enterprises in cooperating with Europe. Given the enormous scale of China-EU cooperation, it is inevitable that differences and frictions will arise, but such differences should not become a pretext for fabricating accusations, still less an excuse for setting restrictions, increasing pressure, and affecting practical cooperation. China is willing to properly handle differences and frictions with the EU through dialogue and consultation. As for the U.S. Section 301 investigation on the capacity issue, this is a typical act of unilateralism that seriously undermines the international economic order. The U.S. side cannot narrowly define production capacity exceeding domestic demand as “overcapacity” and attach the label of “excess.” Nor does it have the right, through a Section 301 investigation, to unilaterally determine whether a trading partner has “overcapacity” and to adopt unilateral restrictive measures. China urges the U.S. side to correct its wrong approach and return to the right track of resolving issues through dialogue and consultation. China will closely follow developments, reserve the right to take necessary measures, and firmly safeguard its legitimate rights and interests.
Second, on China’s domestic demand. As our position paper points out, some people claim that “insufficient domestic demand in China has led to overcapacity,” but this does not conform to the facts. China is not only a manufacturing powerhouse, but also a major consumer market. Domestic demand has long been the main engine of China’s economy. From 2013 to 2024, domestic demand contributed an average of 93 percent to China’s economic growth, with consumption and investment contributing 55 percent and 38 percent, respectively, on average. China’s total retail sales of consumer goods rose from 23.8 trillion yuan in 2013 to 50.1 trillion yuan in 2025, more than doubling. Based on World Bank purchasing power parity calculations, China’s retail sales in 2025 were about 1.7 times those of the United States, meaning China is already the world’s largest commodity consumption market in practical terms. For example, in food consumption, China’s Engel coefficient has fallen to 29.8 percent, and per capita protein supply has exceeded 130 grams per day, higher than in many developed countries. In terms of industrial goods consumption, annual per capita purchases of air conditioners, refrigerators, mobile phones, and automobiles have already approached OECD-country levels.
At present, insufficient effective demand in China is a stage-specific phenomenon in the transition from high-speed growth to high-quality development. Over the long term, however, China’s consumption space remains vast and full of potential, and its role as the main engine will become even more prominent. Over the next decade, China’s middle-income group is expected to exceed 800 million people, and per capita GDP will reach the level of moderately developed countries. Structurally, China is accelerating the shift from goods-led consumption toward a pattern in which goods and services are equally important. Service consumption is developing rapidly, and by 2030 it is expected to account for more than half of total consumption. China’s 15th Five-Year Plan contains a dedicated chapter on domestic demand, emphasizing the need to treat demand expansion as a strategic priority, expand effective investment, vigorously boost consumption, implement special initiatives to stimulate consumption, upgrade goods consumption, unlock service-consumption potential, foster new forms of consumption, guide new supply through new demand, create new demand through new supply, promote positive interaction among consumption, investment, supply, and demand, and strive to achieve a higher-level balance between supply and demand.
Third, on global economic imbalance. Global economic imbalances have always existed and are a historical norm. Under the global economic structure and international economic governance system formed after World War II, the world economy has experienced a major imbalance roughly every decade or so, and some of these episodes have even triggered international economic and financial crises. Each new round of imbalance prompts wide international discussion, though the focus has kept changing. Some discussions emphasize market factors such as the savings-investment structure and industrial and supply-chain division of labor; others focus on institutional factors such as the international financial system and macroeconomic policy. The roots of economic imbalance are extremely complex.
In recent years, global economic imbalance has taken on new features. Institutions such as the International Monetary Fund believe that the macroeconomic policies of countries, especially fiscal policy, are a key factor behind current global imbalances. The United States has accumulated a huge debt imbalance and needs to improve its fiscal position; Europe suffers from insufficient investment and needs to raise productivity; China needs to expand domestic demand. That view is only one school of thought, but it does reflect the systemic and complex nature of global economic imbalance. Some people seek to link global economic imbalance with the so-called “overcapacity.” This is simplistic attribution, a deliberate attempt to confuse the issue, and motivated by ulterior motives. By contrast, China’s high-quality capacity has not only met domestic demand but has also made important contributions to global development and played a significant role in promoting global economic balance.
Thank you.
Reporter from Elephant News:
China’s emerging industries such as artificial intelligence, new-energy vehicles, and lithium batteries have developed rapidly, and their export performance has also been strong. What are the sources of China’s industrial strengths and momentum? Thank you.
Yan Dong:
Thank you for your question. I will ask Mr. He Shaojun from the Department of Foreign Trade to answer.
He Shaojun:
Thank you. We have also noted that in recent years China’s electric vehicles, lithium batteries, and artificial intelligence industries have developed rapidly and posted strong export growth. According to customs statistics, in the first half of this year, China’s exports of electric vehicles and lithium batteries increased by 68.7 percent and 37.6 percent, respectively. AI-related products such as industrial robots and 3D printers also performed strongly, rising by 18.6 percent and 109.3 percent, and have become new calling cards for China’s foreign trade. Overall, this is the result of multiple factors, including a solid industrial foundation, market-driven iteration, enterprise innovation, and international openness and cooperation. These can be summarized as four major strengths.
First is the strength of a complete industrial system. China has now established a comprehensive and efficient new-energy vehicle industrial chain covering basic materials, components, complete vehicles, and manufacturing equipment. Its supply-chain responsiveness, cost control, and delivery speed are globally leading. In the Yangtze River Delta, through coordinated industrial-cluster development, a new-energy vehicle manufacturer can obtain needed supporting components within a four-hour drive.
Second is the strength of a super-sized market. China has the world’s largest consumer market, which provides a proving ground and training ground for new technologies, products, and services. New-energy vehicle sales have ranked first in the world for 11 consecutive years, and fierce domestic competition has greatly improved product technology. Massive user demand and diverse application scenarios have accelerated AI technology iteration, enabling rapid verification of technical feasibility and spreading R&D costs across a larger base.
Third is the strength of innovation-driven development. China has firmly pursued innovation-driven development, using scientific and technological innovation to lead industrial development and continuously enhance industrial competitiveness. National R&D intensity rose from 1.91 percent in 2012 to 2.8 percent in 2025. International patent applications have ranked first in the world for seven consecutive years, and China accounts for 60 percent of global AI patents. Technological breakthroughs have been achieved in areas such as power batteries and general-purpose large models. By 2025, the energy density of power batteries had increased by more than 50 percent compared with 2018, while production costs had fallen by more than 60 percent. Domestic large models such as DeepSeek and Qwen have risen collectively.
Fourth is the strength of openness and cooperation. At present, the global energy system is undergoing deep transformation, and artificial intelligence is developing rapidly. Economic and trade cooperation in related fields has enormous potential. According to institutional estimates, by 2030 the global market size for products and technologies such as electric vehicles, solar energy, and wind power will reach $2.1 trillion, while the AI data-center market is expected to grow by 45 percent annually over the next five years. The market outlook is broad. Guided by the principle of mutual benefit and win-win cooperation, China advances international cooperation and supports capable electric-vehicle and lithium-battery enterprises in making rational and orderly cross-border arrangements for industrial and supply chains, thereby empowering green transition and industrial upgrading in other countries.
The development of China’s modern industries and the enhancement of its foreign-trade competitiveness are driven by innovation and by the continuous deepening of reform. Going forward, we will continue to advance high-quality trade development, further support enterprises in related industries in integrating more deeply into global industrial and supply-chain systems, and inject more vitality into global digital, intelligent, and green transformation.
Thank you.
Jia Huili:
Thank you. We now have time for one last question.
Reporter from CCTV, China Media Group:
Under the current volatile international situation, maintaining stable and smooth global industrial and supply chains faces many challenges and requires the joint efforts of all countries moving in the same direction. What suggestions does the Ministry of Commerce have for better promoting an open and inclusive global industrial and supply chain cooperation landscape? Thank you.
Yan Dong:
Thank you for your question. I will answer this one.
At present, with the international situation turbulent and protectionism on the rise, safeguarding the stability and smooth functioning of global industrial and supply chains is in the interests of all parties and is also an urgent expectation of the international community. President Xi Jinping has pointed out that economies advance together when connected and all fall behind when closed off. China is willing to work with all parties to uphold the global free-trade system, preserve an international environment of openness and cooperation, and jointly promote the building of an open and inclusive global industrial and supply chain cooperation landscape.
We must uphold mutual benefit and win-win outcomes and make the global development pie bigger. When the pie grows larger, conflicts over distribution become smaller. All parties should jointly seize the opportunities created by a new round of industrial revolution and technological transformation, strengthen international cooperation in areas such as green and low-carbon development, artificial intelligence, and bio-manufacturing, and use shared technological dividends to break through growth bottlenecks and continuously inject new momentum into the global economy. All parties should also pay greater attention to the “real imbalances” between developed and developing economies, strengthen industrial cooperation as well as trade and investment cooperation, help more developing countries and regions integrate into the international division of labor, accelerate industrialization and modernization, and open up a new blue ocean for global industrial cooperation.
We must uphold openness and connectivity and promote sound circulation in global industrial and supply chains. The division of labor and cooperation in global industrial and supply chains did not take shape overnight, and forced intervention by human hands will only backfire. All parties should continue expanding market openness, promote trade and investment liberalization and facilitation, improve the efficiency of allocating factors and resources, and jointly create and maintain an open global innovation ecosystem so that international industrial cooperation can deliver greater benefits. All parties should oppose the politicization and over-securitization of economic issues, respect market rules, reduce barriers to trade, lower obstacles to investment cooperation, promote full market competition, stimulate business vitality, and make the flow of factors and resources and the distribution of industrial division of labor more rational and orderly.
We must uphold policy coordination and foster a stable and predictable environment for cooperation. The world economy is highly interconnected, and national industrial policies have obvious spillover effects, so communication and coordination should be strengthened, especially among major powers, which should set an example. All parties should adhere to consultation on an equal footing and properly manage differences, abandon unilateralism and protectionism, and oppose discriminatory and exclusionary practices. All parties should strengthen bilateral and multilateral dialogue on industrial policies, uphold openness and transparency, and deepen exchanges and discussions on industrial policy under the WTO framework, taking more coordinated and effective measures to better pool the combined forces of global economic growth.
We must uphold multilateralism and build a fairer and more equitable international economic order. The multilateral trading system with the WTO at its core is the cornerstone of economic globalization and international trade. In economic and trade exchanges, all parties should uphold equality and mutual benefit, respect each other’s stage of development and national conditions, and strive through fair competition to run faster themselves rather than trip others up, while jointly resisting bullying by the strong against the weak. All parties should adhere to genuine multilateralism, uphold the WTO’s basic principles and rules, advance WTO reform in step with the times, safeguard the WTO’s authority and effectiveness, and make better use of multilateral and regional cooperation mechanisms such as the G20, BRICS, and APEC, so as to jointly defend fairness and justice and make the global economic governance system more just and equitable.
Thank you.
Closing
Jia Huili:
That concludes today’s press conference. Thank you to all the speakers and to all the journalists for participating. Goodbye.