China's State Subsidies Drive Overcapacity in Strategic Industries, Risking Trade Conflicts
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China's overcapacity in industries like EVs and solar panels is due to state subsidies and support that allow firms to overproduce regardless of demand. This hurts manufacturers in other countries.
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China's capacity utilization rates in industries like semiconductors and batteries have dropped significantly in recent years, indicating serious oversupply issues.
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China's exports of overcapacity products like EVs, solar cells, and batteries have surged multi-fold from 2019 levels.
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China experienced similar overcapacity issues around 2014-2016 after huge stimulus spending, showing this is a recurring structural problem tied to state industrial policies.
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The Rhodium Group report says China's bias toward supporting producers over consumers will compound imbalances and put it on a collision course on trade with other nations.