Western policymakers have cut back 1 trillion yuan (US$139 billion) for China’s electric vehicles, lithium batteries and solar cells, reflecting “genuine fears” that overcapacity will distort their own markets. Exports may face new challenges this year.
Analysts say legal action and tariff hikes by the United States and the European Union over what they see as an oversupply of cheap goods will threaten the world’s second-largest economy unless China diversifies away from the West and boosts domestic demand. He said that there is a possibility that certain areas may be set back.
“The key question is how these industries will cope with growing headwinds, not only by identifying new commercial opportunities, but also by balancing geopolitical and trade policy risks.” said Nick Marlo, principal analyst for global trade. Economist Intelligence Unit.
“I think this will be less of an ‘excuse’ for Western policymakers to engage in protectionism and more of a reflection of real fears that these products are distorting their own markets. .”
Filing an anti-dumping lawsuit can provide a type of immediate protection.
He also said there was “growing sentiment” in Western capital against the idea of getting consumers to subsidize China’s growth engine.
The US government has already banned the import of EV battery materials from China, labeling it a “foreign company of concern.”
The Ukraine war, which marks its second anniversary on Saturday, is also a factor affecting China’s relations with Western markets, with the British government on Thursday announcing a new sanctions package against Russia that includes three Chinese electronics companies.
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“By filing an anti-dumping case, you can get a kind of immediate protection effect,” said Jayant Menon, a senior researcher at ISEAS-Yusof Ishak Institute in Singapore.
“Once a competitor loses its market share, it is difficult for a country to regain it.”
According to online investment publication Gelonghui, Chinese manufacturers will be able to produce 4,800 gigawatt-hours of batteries in 2025, four times the demand from EV makers.
Annual supply capacity for solar panels reached 800 gigawatts to 1,100 gigawatts last year, significantly exceeding projected global demand of about 300 gigawatts, according to the Economist Intelligence Unit.
Increasing domestic demand is a difficult undertaking that requires time, effort and, perhaps most importantly, domestic reforms.
Chen Chi-wu, chair professor of finance at the University of Hong Kong, said local governments are providing venture capital and land tax incentives to EV companies.
“Beijing recognizes that the lack of domestic demand is a major economic challenge,” said Wang Zicheng, a researcher at the Beijing-based China Center on Globalization.
“But growing domestic demand is a difficult undertaking that will require time, effort and, perhaps most importantly, domestic reforms.”
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Maro added that China’s trade tensions are as tied to the economic challenges China has domestically.
“The worsening imbalances in the Chinese economy in terms of savings and investment will naturally be replicated in the trade sector.”
MIT Technology Review said in a paper published in February 2023 that battery and EV development will provide growth opportunities for China’s auto sector during the coronavirus pandemic and give it more weight for “climate policy leadership.” Ta.
And China can alleviate overcapacity and avoid the wrath of the West by setting up factories in the United States, Europe, or Southeast Asia, which are already options, said Guangdong Reform Association executive chairman. Peng Peng said.
Peng also said that the sheer number of potential non-Western markets could offset the drop in demand, so manufacturers could sell hardware to India and other parts of the world that aren’t aligned with the US or Europe. He added that it can also be done.
