Illustration: Liu Xidan/Global Times

Recently, politicians in the US and Europe have been complaining about "overcapacity." Following US Treasury Secretary Janet Yellen, German Chancellor Olaf Scholz is expected to raise the issue with Beijing during his visit to China. Advanced economies are unanimously attributing the challenges facing their green industries to "artificially cheap clean tech exports" from China, which, as they claim, result from overcapacity.

While the US exports its produce in massive terms across the globe, it throws dirt on China for what it calls an overcapacity of clean tech goods. To be clear, the examination of overcapacity is never based on a single country's output or exports. If it were, the US should be blamed as a major source of overcapacity for its production of more than 30 percent of the world's corn. 

Meanwhile, whether or not data supports the overcapacity concern deserves a closer look. According to estimates by the International Energy Agency, by 2030, the world will need 45 million EVs, and the addition to installed PV capacity will reach 820 gigawatts, almost four times that of 2022. These targets are high and challenging considering the current level of global production. There is a gap in supply, not overcapacity. 

Back home, China's mega-market requires a continuous supply, whether local or foreign. Last year, the domestic market consumed most of the EVs produced in China. With over 330 million cars running on Chinese roads, there are more than 20 million updates per year based on a 15-year refresh rate. Foreign cars are also popular. In 2023, the sales of German-made EVs in China increased by nearly 50 percent.

As for prices, Chinese EVs are significantly more expensive in foreign markets compared to the Chinese market. China's leading EV companies are not lowering prices in order to expand their business. The overcapacity accusation laid on China proves unfounded if excess production inevitably leads to lower prices. 

The underlying cause of the "overcapacity" complaint from the West is actually a shift of competitiveness. The US and Europe once enjoyed "happy globalization," when they took almost all critical segments of the supply chain, making profits easily. When things begin to change, they are becoming concerned. As Bloomberg pointed out, it's not excess capacity that worries advanced economies, but rather the efficiency of Chinese companies. 

So the real issue under discussion is competition. Competition, as a natural process of market economy and globalization, results in the division of labor under which countries leverage their own comparative advantages to allow the global economy to run in the most efficient way. One buys cheaper goods produced by others and sells things that it can produce more cheaply. This is the standard economics of the West over the past 200 years, and now it is being challenged by wary Western governments.  

To get ahead in the competition, companies need to make relentless efforts for innovation and efficient business ecosystems. Now that the Chinese government has scrapped all EV subsidies, those who stand out have all survived fierce competition. In 2023, BYD invested nearly 40 billion yuan ($5.53 billion) in R&D, and Chinese engineers and workers are always known for their talent and hard work. 

Regrettably, the EU has decided to punish innovation and industriousness. Within a few weeks, a series of investigations were announced, targeting companies from China. If the EU is serious about its climate ambition, it should thank China for contributing to green development with its affordable clean energy products. By blocking Chinese green tech products, the EU is turning its back on its own commitment to the green transition. 

Division of labor is a natural outcome of economic globalization. All countries have their own place in a globalized economy. Instead of pinning the fake label of "overcapacity" on China, the US and Europe should stop looking for excuses for waning competitiveness, see things as they are, and get ready for fair competition. After all, picking fault with others never makes one stronger. 

The author is an observer on international affairs. opinion@globaltimes.com.cn