Picture used for illustrative purposes only.

United States Secretary of Treasury Janet Yellen in Beijing on Monday expressed loudly at a press conference that China is producing more of electric cars, solar panels, lithium-ion batteries and flooding the markets at cheaper prices, causing the death of Western, including American, firms in these sectors. She was complaining bitterly against the subsidised Chinese growth and how it gains an unfair advantage over products manufactured in Western markets. The Chinese responded saying that the America view was “misguided”, and they even wanted to complain to the World Trade Organisation (WTO) against American pressure tactics. Yellen was reminding the Chinese that they did a similar thing a decade before when they flooded world markets with subsidised steel made in China and depressed steel prices globally.

It seems to be the case that China’s excess capacity is quite conspicuous. The domestic consumption in China is sluggish, and the economic growth has slowed down, especially due to the crisis in the property sector. The loans from four of the big Chinese banks had jumped 25 per cent to $1.2 trillion last year. But it seems to be paying off especially in the clean energy sector. This sector has contributed $ 1.6 trillion to the Chinese economy. It amounts to 40 per cent of the GDP according to research group Carbon brief. China’s solar-panel manufacturers dominate 80 per cent of the market, which is in excess of its 36 per cent share of the global demand. China’s $118 billion battery-maker CATL produced 747 gigawatt (GWh) of power last year, while its 387 GWh was what was installed in the products sold in the home market. What Yellen and others fear is that China will divert the unconsumed capacity to the global markets and the Western manufacturers of green technology will be at an obvious economic disadvantage. It is interesting that the US and others in the West are apprehensive of a Chinese economy that is struggling to revive its pre-Covid phase of 6 per cent growth after decades of double digit growth, and its present modest annual growth target is 5 per cent.

The US, much more than members of the European Union (EU), has been hoping that the post-pandemic economic slowdown would bring the Chinese economy a few notches down, and that many of the American business based in mainland China would shift to other bases like Vietnam, the Philippines, and India. But China seems to be fighting to keep its position as the second largest economy in the world after the US. Soon global economists had to concede that the other Asian countries cannot completely replace China, and that there has to be a modified strategy of China plus. That is, the other countries can absorb a bit of China’s share of the global economy because China still seemed to enjoy cheap labour force, and it also had a huge labour force which smaller countries like Vietnam and the Philippines could not match.

The US’ political bid to corner China by weakening its economic growth is based on political assumptions. The US does not want China to become a rival superpower as did the Soviet Union or Communist Russia in the middle of the last century. Chinese President Xi Jinping’s Belt and Road Initiative (BRI) going beyond China was seen as an attempt to extend China’s footprint across the globe. The BRI has not been successful, but that has not ended American worries. The US does not want China to access the latest AI-related technologies for fear that Beijing will not hesitate to use it to gain political advantage in the tussle for global power with the US.