Why the 'China overcapacity' lie collapses under facts

By Shao Xia

As data show that China's trade surplus hit a record high of over $1 trillion in the first 11 months of 2025, the "China overcapacity" narrativehas resurfaced in Western media, as expected.

We believe a lie cannot become truth, no matter how many times it is repeated. But for facts to be known far and wide, they must be stated loud and clear.

Where does China's trade surplus come from?

China's trade surplus isnot a product of manipulation, as some in the West have suggested; it is the natural outcomeof the evolving international division of labor.

Let's make no mistake: when Western economies offshored labor-intensive, low-margin, high-pollution industries decades ago, they did not mean to give away profits, still less to empower a developing country like China to become a manufacturing giant. They did it for the self-serving purpose of occupying the upper end of the industrial chain for more lucrative returns.

When China took them on, it did not know it could one day transform them from labor-intensive to capital-intensive and now technology-intensive production.But decades of diligence and dedication to breaking new ground and pursuing excellence have paid off. Today, China is the only country in the world that encompasses all industrial categoriesin the UN industrial classification, contributing roughly 30% of global industrial output and leading the world as the largest manufacturing hub. It excels in cost efficiency, delivery speed, and reliability, and innovation capability – Chinese businesses are competitive for good reason.

Ironically, China's 2025 trade surplus was achieved amid the harshest high-tech restrictions by Western economies – export controls on advanced chips, bans on Extreme Ultraviolet (EUV) lithography machines, and an ever-expanding "entity list." Yet, contrary to their expectation, these measures have accelerated China's drive for technological self-reliance.

The Western rhetoric essentially demands that China remain locked in the outdated trade model – "exchanging hundreds of millions of shirts for one airplane." But give me a break. Isn't it naive and illogical to expect other countries to stay static forever? China, for one, is not such a country. It has innovated to produce what it couldn't buy, shifting gears from import reliance to competitive exports, and achieving a historic trillion-dollar surplus.

Is China really suffering from 'overcapacity'?

"Overcapacity" implies production far outstripping demand, leading to unsold inventory and price collapses – none of which applies to China. Take new energy vehicles (NEVs): In the first 11 months of 2025, China produced 14.9 million units and sold 14.78 million,hardly a sign of excess supply.

From a global demand perspective, China's capacity is neither excessive nor insufficient.According to estimates by the International Energy Agency (IEA), achieving carbon neutrality goals requires global NEV sales of about 45 million units by 2030 and battery demand of roughly 3,500 gigawatt-hours – far exceeding current global supply capacity.

Chinese new energy products are widely welcomed for their affordability, quality, and green attributes. In the first ten months of 2025, China exported over 2 million NEVs, up by more than 90% year-on-year, driven by strong demand from marketsas diverse as the UK, Australia, Mexico, and the Philippines. In many developing countries, imports of Chinese photovoltaic equipment have helped ease power shortages andexpand energy access.

Who has actually benefited?

Claims that China's surplus "unbalances" trade ignore a key reality:Multinational corporations are the major beneficiaries.Customs statistics track goods flow, not profit distribution. Western multinationals embed supply chains in China to leverage its manufacturing efficiency. The result is: While China books the surplus, profits flow overseas. For example, Chinese firms capture only 3-6% of iPhone retail prices through assembly services, while US companiesreap the lion's share from design, core components, and branding.

Ordinary households in Western countries have also benefited. Amid persistent global inflation, China's stable supply capacity and competitive prices haveserved as a cushion.From solar panels and new energy vehicles to household appliances and consumer electronics, Chinese products haveprovided a buffer against rising living costs.International research confirms that imports from China help contain inflation and reduce household expenses – a systemic dividend of China's integration into global chains.

A view of the National Exhibition and Convention Center (Shanghai), the main venue for the eighth China International Import Expo (CIIE), in east China's Shanghai, November 4, 2025. [Photo/Xinhua]

Why is China a partner of choice

A China that continues to improve itself will not turn inward.On the contrary, it pursues a higher-standard opening up, sharing opportunities with the world, rooted in the belief that healthy economic and trade relations must be two-way and mutually beneficial.

China's overall tariff rate has been reduced to 7.3%, below its WTO commitment of 9.8%. It has granted zero-tariff treatment on all tariff lines to least developed countries with diplomatic ties to China and has announced its willingness to extend this to 53 African nations through economic partnership agreements. The Hainan Free Trade Port, with its island-wide independent customs operations, stands as a new landmark of opening up: Its zero-tariff list covers 6,600 tariff lines (about 74% of all items), offering global businesses a fast track into the Chinese market and deeper integration into its industrial and supply chains.

Meanwhile, the eight-year-old China International Import Expo (CIIE) has become a permanent platform for shared development, with cumulative intended deals exceeding $500 billion – further demonstrating China's unwavering commitment to opening its vast market.

To conclude, China has become a leading manufacturing powerhouse through capability, not rhetoric. It seeks to enlarge the global economic pie, not to carve out an exclusive advantage. For those willing to engage in cooperation, China stands as a ready partner; for those clinging to the "overcapacity" narrative, reality will not bend to their will. Whether to embrace win-win opportunities, the choice is theirs to make.

Shao Xia is a commentator on international affairs for CGTN.