Overcapacity talk won’t affect MNCs’ commitment

Exaggerating the “China overcapacity” narrative will impede the advancement of high-quality production capacity globally but will not discourage multinational corporations from expanding their presence in the country, said market watchers and foreign business executives.

They said the active participation of foreign automakers and parts suppliers in the 2024 Beijing International Automotive Exhibition, or Auto China 2024, and the 135th session of the China Import and Export Fair (Canton Fair), held in Guangzhou, Guangdong province, along with the significant rise in signed contracts, are compelling rebuttals of the “China overcapacity” narrative.

Wang Jinbin, vice-dean at the Renmin University of China’s School of Economics, said the view that China extensively exports low-priced new energy products is not in line with reality. In fact, the prices of Chinese new energy vehicles overseas are generally higher than those in the domestic market.

Yet, their sales are increasing rapidly, indicating that the prices and sales are determined by market forces like supply and demand, said Wang.

From the perspective of domestic conditions in China, apart from exports, there remains significant demand in both urban and rural markets, providing long-term stable demand for Chinese new energy products, said Ding Rijia, a professor specializing in energy economy at the China University of Mining and Technology in Beijing.

“The production capacity in China’s new energy sector is far from being surplus,” said Ding.

Dismissing the “China overcapacity” narrative, Markus Steilemann, CEO of German chemicals manufacturer Covestro AG, said he is not a fan of excessive regulations, especially in markets where free trade is essential.

Excessive prohibitive measures and restrictions may not effectively boost productivity; criticizing overcapacity is not the right way (to global cooperation), said Steilemann.

With China entering a new era of green and innovation-led growth, MNCs are fairly optimistic about China’s long-term growth potential and see abundant opportunities arising from the country’s focus on the high-end manufacturing industry and digital economy, said Mohammed Al Ajlan, chairman of the Saudi-Chinese Business Council and deputy chairman of Ajlan &Bros Holding, a Saudi Arabia-based conglomerate.

This will not only benefit global trade but also create more growth points for foreign companies to build their global supply chains and a consumer base in China, he said.

Echoing similar sentiments, Rui Coelho, CEO for China unit at Air Liquide SA, a French provider of industrial and medical gases, said that China’s comprehensive and reliable industrial chains play a crucial role in stabilizing the global supply chain and are indispensable.

“The country’s economic development model and market environment are continually evolving, offering opportunities and valuable experiences for our business expansion and enhancement,” said Coelho.

Apart from running more than 120 plants across China, the French company will set up a large-scale hydrogen filling center in Shanghai in the second half of this year. It will accelerate the deployment of hydrogen energy in Shanghai and the Yangtze River Delta region.

Upbeat about the Chinese market, more than 12,000 foreign-invested companies started operations in China in the first quarter, up 20.7 percent year-on-year, with actual investment amounting to 301.67 billion yuan ($41.8 billion), up 41.7 percent compared to the fourth quarter of 2023, statistics from the Ministry of Commerce showed. – China Daily/ANN