China faces significant production overcapacity across various products, complicating control measures. Historically linked to its investment-driven growth model, recent oversupply issues emerged post-COVID-19, as household consumption lagged. The surplus in clean technology has gained international attention, prompting discussions on addressing these supply-demand imbalances through alternative means.
Production overcapacity is not a new phenomenon in China, but this time it concerns a greater number of products. This variety makes oversupply more difficult to control, and the shortfall in the domestic market will have to be made up by other means. Discover which ones in our study.
Overcapacity, not new to China
China has long accustomed to an investment-driven growth model, which is central to its stellar economic growth over the past three decades. But it also makes the economy susceptible to supply-demand imbalances, leading to recurring episodes of industrial overcapacity. These can be traced back to the 1990s, when accelerated market reforms led to a glut of labor-intensive manufactured goods. A more recent episode occurred in 2014-2016, when the massive investment-led stimulus that followed the global financial crisis triggered an oversupply of construction materials.
While this playbook is not new, the imbalances have become evident again since the COVID-19 outbreak, largely due to a production-driven stimulus aimed at reducing social interaction. But as the economy emerged from the pandemic, household consumption has failed to pick up enough to stomach the increases in production. And amid the international race of green transition, China’s production surplus in clean technology products also became a focal topic globally as its excess capacity could be enough…
