China Clarifies Stance on "Overcapacity" in Auto and Other Sectors

On July 28, the Ministry of Commerce released China's Position on the Alleged "Overcapacity" Issue and addressed related concerns during a press conference held by the State Council Information Office. In response to certain economies politicizing trade and economic issues, hyping up claims of Chinese "overcapacity," and intensifying restrictions against China, the Ministry stated that "overcapacity" is a dynamic phenomenon in market economies, influenced by supply-demand dynamics and industrial life cycles, and follows a cyclical process of "balance—imbalance—rebalancing." The Ministry emphasized that China’s overall industrial capacity utilization remains within a reasonable range. High-tech industries are operating at high utilization rates, while temporarily lower utilization rates in traditional sectors are a normal occurrence during industrial upgrading. Currently, China’s industrial supply and demand are generally balanced, and operations remain stable. Regarding allegations that subsidies have caused overcapacity, the Ministry stressed that subsidies compliant with international rules do not lead to overcapacity; rather, protectionist-oriented, non-compliant industrial policies disrupt global trade and economic order. It further noted that the U.S. and EU have recently introduced numerous subsidy measures that raise concerns about restricting competition. On the relationship between trade surpluses and overcapacity, the Ministry clarified that large export volumes and trade surpluses do not equate to overcapacity. Trade surpluses reflect evolving patterns of international division of labor, and many manufacturing powerhouses have maintained persistent surpluses over time. China’s trade surplus stems from its efficient and comprehensive industrial system, demonstrating strong international competitiveness and supporting the global green transition. From the perspective of balance of payments, China has not exhibited significant imbalances. The Ministry also highlighted that China’s industrial strengths arise from multiple factors, including a solid industrial foundation, an ultra-large-scale market, enterprise innovation capabilities, and international cooperation—all continuously enhanced through innovation-driven development and deepened reforms. Furthermore, China is delivering “market dividends,” “development dividends,” and “innovation dividends” to the world, shaping what it calls “China Opportunity 2.0.”