As Janet Yellen decries China’s EV overcapacity, commerce minister calls such accusations ‘groundless’

China’s commerce minister has embarked on a trip to Europe with an eye on preventing his country’s electric vehicle exports from resulting in orchestrated trade actions by Washington and Brussels.

On Sunday, Wang Wentao highlighted the country’s contribution to the world’s green energy transition and the war on climate change, during round-table discussions with more than 10 Chinese manufacturers of electric vehicles and lithium batteries in Paris.

“China’s electric-vehicle companies are competitive due to the innovation of technology and comprehensiveness of its supply-chain network,” the official Xinhua quoted Wang as saying during the meeting, while denying that government subsidies had played a role in the industry’s rapid development.

“The accusations from the US and EU about China’s overcapacity are groundless.”

China’s overcapacity, exports in the cross hairs as Janet Yellen gets to work

“The Chinese government will fully support and defend the rights of the industry, because our electric vehicle development has made important contributions in the process of the world’s green transitioning,” Wang reportedly told the Chinese firms, without elaborating.

He also told producers to enhance risk management in their overseas business expansion and to deepen cooperation with local partners.

EVs and related concerns regarding overcapacity in their production have become an outsized issue challenging China’s relations with its two major export destinations. US Treasury secretary Janet Yellen is visiting China to apply pressure targeting the overcapacity of its EVs, solar panels and lithium batteries, and EU officials, including executives of German carmakers, are expected to visit China soon.

Analysts have warned that the politicisation of China’s industrial overcapacity – Yellen has already raised the issue in almost every meeting with Chinese officials and economists – could continue to haunt bilateral relations in the US presidential election year.

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US Treasury chief Janet Yellen in China aiming to further stabilise bilateral trade ties

US Treasury chief Janet Yellen in China aiming to further stabilise bilateral trade ties

“The US and EU could take some measures to protect their own sectors,” said Wang Yong, a professor with the School of International Studies at Peking University. “But customers demand Chinese products due to their better values, and competition can lead to positive economic effects.”

Wang Yong was part of the Peking University faculty that sat with Yellen for exchanges on Sunday.

“It’s more about better utilisation of capacity to satisfy the huge demand of developed and developing countries in the world,” he said.

However, the US presidential election in November and an inability to reach technological breakthroughs have pressured Western politicians into raising the issue, Wang Yong added.

China’s Ministry of Industry and Information Technology has also issued fresh accusations that some countries lack evidence and are hurting themselves as they push through restrictive trade measures targeting Chinese electric vehicles.

The war for domination in the world’s No 1 electric car market

“Such actions are detrimental to the development of the global automotive industry and could impede the progress of their own electrification transformation processes,” the ministry’s spokesman was quoted as saying by the state-run China Daily on Monday.

Stephen Olson, a senior fellow at the Pacific Forum and a visiting lecturer at the Yeutter Institute of International Trade and Finance, explained that the US and EU positions on excess industrial capacity in China are “closely aligned”.

“They share serious concerns about the likelihood of excess Chinese production … with devastating consequences for local producers,” he said, adding that China could respond to their moves by targeting the massive subsidisation programme of Washington’s Chips and Science Act and Inflation Reduction Act of 2022.

“China will also argue that it is producing the green energy products that the world desperately needs to effectuate the transition to a less carbon-intensive future, and will in particular point out how beneficial this is to the developing world,” Olson said.

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