2024-05-11


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China

  • What Xi Jinping gets wrong about China’s economy

    Mr Xi is also familiar with Chinese overcapacity. In his first term, his main economic policy was supply-side structural reform. In 2016 the state cut coal capacity by 290m tonnes and steel capacity by over 60m. China removed more capacity in these industries than most countries have ever possessed. But in Paris, Mr Xi rejected Europe’s concerns, at least in the new-energy industry: “The so-called ‘problem of China’s overcapacity’ does not exist, either from the perspective of comparative advantage or in light of global demand.” Who is right? China’s problem is not always as easy to spot as Europe’s mountains and lakes. “Capacity” sounds like a technical term, which might be measured in tonnes or cubic metres. But it is rarely economical to run a plant at its full technical limits. Moreover, in a rapidly growing economy that is evolving quickly, existing capacity can become obsolete or overwhelmed faster than in a mature economy, as Dianqing Xu of Huron University College and Ying Liu of Dongbei University of Finance and Economics have argued.