Chinese manufacturing capacity is helping the world to fight climate change and contain inflation, finance vice-minister Liao Min said, pushing back against US Treasury Secretary Janet Yellen’s latest criticism of China’s “industrial overcapacity”.
“For decades, China has been a force of disinflation for the world through its supply of manufactured products with good value for money,” Liao said in an exclusive interview in Rio de Janeiro, where he attended this week’s meeting of G20 finance ministers and central bank governors.
“It is now also providing green goods for the world as countries try to achieve their carbon reduction goals by 2030,” Liao said.
Global demand for new energy cars will be 45 million to 75 million units by then, far exceeding the world’s current supply capacity, he added, citing estimates by the International Energy Agency.
Liao spoke to Bloomberg News on Friday, a day after Yellen vowed to “keep pressing China to address its macroeconomic model”, which she said was channelling “too much” savings and subsidies into manufacturing and contributing to the overcapacity.
China is facing rising trade barriers in developed economies such as the United States and European Union, which have been complaining about the excess output and its impact on their industrial sectors and companies.
The EU is moving forward with tariffs on Chinese electric cars, while Republican candidate Donald Trump has threatened to impose duties of 50 per cent or more on imports of Chinese goods if he wins November’s presidential election.
Some developing nations, including Brazil and Turkey have also placed tariffs on Chinese products including steel and cars, though they have been less vocal in criticising Beijing’s industrial policy.
While China pays attention to the concerns of major economies about overcapacity, it too is concerned by trade threats like tariffs, Liao said.
“We should communicate in a candid manner with respect to rules of market economy and true facts.”
Liao was a key member of China’s team of trade-war negotiators facing off against US officials during Trump’s presidency. He travelled to the US as an aide to then vice-premier Liu He and met Trump in the Oval Office.
More recently, Liao greeted Yellen when she visited China in April.
02:22
US Treasury chief Janet Yellen leaves China after ‘difficult conversations’, overcapacity gripes
US Treasury chief Janet Yellen leaves China after ‘difficult conversations’, overcapacity gripes
The differing approaches to China by rich nations compared with those from the Global South were evident at the Group of 20 meetings.
Yellen blasted China’s economic strategy as “a threat to the viability of firms and workers around the world”, while the president of Bundesbank, Joachim Nagel, urged Brazil to sustain its relationships with the West instead of betting exclusively on China to foster economic growth.
The Indian government’s chief economic adviser, V. Anantha Nageswaran, said the topic of China’s over-manufacturing was not brought up during any of his delegation’s bilateral talks, though he acknowledged it was an “issue” for his country.
Brazilian Finance Minister Fernando Haddad said that while the response from some countries to China’s exports was an “understandable reaction”, it was not sustainable in the long run.
Liao said government subsidies were not the main reason that Chinese industries such as the renewable energy sector had gained competitive advantages. More important factors were years of corporate investment in research and development, entrepreneurship and technological innovation.
“China’s reform and opening-up experience over the past more than 40 years has told us not a single industry can become a globally competitive sector [by] simply relying on government support,” he said.
Liao also argued that some countries were left behind in terms of developing EVs because they enjoyed advantages in the conventional auto sector and therefore did not shift their focus onto the emerging industry.
In contrast, China had to seek growth in new sectors like EVs due to a lack of advantages in the traditional car market.
Demand-supply disequilibrium was only natural for any market economy, Liao said, partly because companies made their own investment decisions and they did so for the long run expecting to meet higher demand. Market forces would show if they had made the right decisions or not, he added.
Large flows of capital funds into new industries was also not rare, he said, citing previous investment frenzies into sectors like information technology, shale gas and biopharmaceuticals, that resulted in “periodical” excess capacity in developed countries.
