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China’s Communist Party accuses US of ‘hyping up’ overcapacity claims as fresh EV tariffs loom

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American officials have been vocal about what they see as the impact of excess Chinese manufacturing capacity, especially in EVs, solar panels, batteries and steel.

They claim that much of that capacity has been achieved through ramped-up state subsidies and by limiting foreign access to Chinese markets – and have warned of retaliation if China does not change its approach.

Multiple US media reports published over the weekend suggested that the administration of US President Joe Biden could raise tariffs on clean-energy goods from China, including quadrupling duties on Chinese electric vehicles.

The White House could also be about to renew tariffs on critical minerals, solar goods and batteries imposed under Donald Trump, Biden’s predecessor and likely opponent for the presidency in November.

US 27.5 per cent tariffs on China’s EV exports have prevented those producers from gaining a foothold in the American market.

The European Union is also investigating allegations that China is exporting its excess capacity, launching anti-subsidy investigations into Chinese EV and wind turbine manufacturers late last year.

Both the EU and the US have said China’s overcapacity is impairing their national security and harmful to their economies, saying it squeezes domestic players out of their own markets.

Chinese players dominate the world market in what Beijing calls the “new three” industries: EVs, lithium batteries and solar panels.

China sees these industries as examples of its manufacturing strength and as the foundations for an economic shift away from the mass output of traditional, low-value-added items such as clothing and home appliances, to advanced production and higher growth.

Beijing is well aware of the risks of overcapacity in these industries. At the annual legislative sessions in March, President Xi Jinping warned against a “headlong rush into new projects” in the drive for new “quality productive forces”.

Nevertheless, it has been a consistent complaint from US officials on their trips to China, including Secretary of State Antony Blinken and Treasury Secretary Janet Yellen.

Just as consistently, Beijing has said the claims are groundless and an attempt to contain China’s growth in those industries.

Meeting EV and lithium battery manufacturers in Europe last month, Chinese commerce chief Wang Wentao said China’s rise in these industries was “driven by innovation and complete supply chain systems”.

And during a visit to France last week, Xi also denied there was a Chinese “overcapacity problem”, while adding that he would welcome more high-level talks on trade frictions.

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