China's overcapacity for energy transition products: myth or reality?

China's overcapacity for energy transition products: myth or reality?

China is building up “unfair overcapacity” in modern manufacturing, particularly in products for the energy transition. During US Treasury Secretary Janet Yellen's visit to China, this theme was dominant and US concerns about the "free" market were significantly shaken. China has enough solar and battery capacity to meet four times global demand in 2022, meaning it has enough EV production capacity to meet global demand three times.

This overproduction hits foreign markets with an abundance of energy transition products at low prices. It is noted that such bubbles are not rare and are not limited to China. The Global Times, which is close to the Chinese Communist Party, argues that the expansion of China's production capacity and price increases is motivated by fierce competition between manufacturers, not government subsidies.

Experts point out that despite their inexpensive offerings, Chinese new energy products are being received positively internationally and supporting United Nations climate protection measures. Chinese companies increased their profits by more than ten percent in January and February 2024, indicating their competitiveness. China is considered an innovation hub as it accounts for almost half of all global patent applications and is a leader in many cutting-edge technologies.

The effects of these developments also affect the sales prices of the products. The US fears that China will be able to dominate the global market and outperform the West in competition. Despite efforts at trade restrictions and wars, China will become increasingly important in many countries in the Global South as a supplier of urgently needed products such as solar panels and energy storage.