China produces as much as 34 percent of the world’s goods, but its share in global exports is ‘only’ 14 percent (the rest has no one to sell to, as Xi Jinping deliberately does not strengthen domestic demand). Twenty years ago, China’s share in production was about ten percentage points lower, and exports were about five percentage points lower. Although both economic growth and China’s shares in global production and trade are slowing, the damage caused by the relocation of production to the East is done.
The West long ago closed numerous factories and jobs, so today, during the green transition when all resources and cheaper finished products are in China, the EU and the US are raising customs barriers under the guise of ‘China overproduces’, without specifying what that actually means. When does production become excessive?
What are the criteria, indicators, formulas? Marijana Ivanov from the Faculty of Economics in Zagreb states that every company knows that overproduction is that which the market cannot absorb, as there is insufficient demand relative to supply.
– However, accusations against China for overproduction are mostly unrelated to a lack of demand in the global market or excessive supply. The concentration of production in China is ‘too high’ primarily because the US and Europe are left with a smaller piece of the global pie, and the green transition is precisely a new global pie that everyone is fighting over, as it is an opportunity for positive shocks that can generate higher profits and higher growth rates and, more importantly, give power in the infrastructure market for the use of renewable energy sources. Therefore, the term ‘China’s overproduction’ is not a professional economic term that would imply objective economic criteria regarding what constitutes acceptable production and what is excessive, for the purpose of optimal allocation of global resources – Ivanov specifies, adding that everything that threatens the capacities and price competitiveness of production in the US and other advanced economies is excessive, or imports from China that can be substituted with domestic (more expensive) production.
Marinko Škare from the Faculty of Economics and Tourism in Pula explains that in economic theory there is a concept of overproduction related to the idea of business cycles and productivity.
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