Chinese engineers and local employees in Hisense South Africa Industrial Park in Cape Town, South Africa.
Over the past decade and more, led by innovation and deep-going reform, China’s economy has maintained steady and sound development. Contributing roughly 30 percent to global economic growth, it has become a key engine of the world economy. Recently, however, there has been some hype about so-called "Excess Capacity" of China, with allegations that China’s trade surplus is disrupting global markets. Such arguments misrepresent the intrinsic logic behind China’s economic growth and high-level opening-up. China is always ready to share development opportunities with all nations, uphold the global free trade system, and advance common prosperity worldwide.
To date, there exists no globally agreed definition of “Excess Capacity”, and major international organisations including the World Trade Organization have not issued an official definition. According to the International Monetary Fund, excess capacity is a complex concept which should be approached from the perspective of macroeconomic scenarios. Economists tend to examine it from macro and micro perspectives. At the macro level, excess capacity is a phenomenon where the production capacity of the whole industry substantially surpasses the total effective market demand. At the micro level, excess capacity refers to a situation where firms' actual output falls short of the optimal level due to monopolistic competition. In reality, economies are no strangers to the state of excess capacity over effective demand driven by fluctuations in economic cycles. The criteria and angles for determining whether excess capacity exists vary greatly across countries and sectors.
