It seems China may also think it produces too much of the stuff

A lithium battery products factory in Yichang, Hubei Province, China.
Reuters/Stringer

  • China has published draft regulations for the battery industry and wants to limit overproduction.
  • This contradicts China’s official position that there is no industrial Surplus production in the country.
  • The West complains about China’s excess capacity, but analysts say this does not apply to all sectors.

The West complains that China overproduces goods and dumps them on global markets. These statements angered Beijing, which rejected them last Monday. He denied these allegations.

But on Wednesday Ministry of Industry and Information Technology of China It issued a suggestion suggesting that Beijing might agree with some of the West’s accusations.

In its proposal, the ministry lays out plans to regulate the battery industry, which, along with electric cars and solar cells, is a key pillar of growth in China’s economic transformation.

The proposal covers a range of issues, including minimum technical standards and environmental guidelines for battery production. However, it is worth noting that it also states that lithium-ion manufacturers should avoid building plants that “simply expand production capacity.”

In 2023 alone, China’s battery production was already large enough to meet global demand, a BloombergNEF Analysis found.

The proposal outlines China’s separate concerns about excess capacity, although Chinese leader Xi Jinping’s administration has rejected the claims. This came as Xi concluded his first trip to the European Union in five years.

The problem of excess capacity in China does not extend to all sectors

To be sure, the issue of excess capacity in China does not extend to all sectors.

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last Bloomberg analysis The researchers found that the problem was mainly in areas where China already had the upper hand over the West, such as low-tech goods and building materials after the country’s real estate collapse.

The country also produces a large surplus supply of solar panels and batteries.

Other analyzes support Bloomberg’s findings that factory production in China is not overwhelming global markets in every sector.

“We find emerging, but not overwhelming, macro evidence supporting the recent geopolitical narrative of overproduction of Chinese goods that unfairly undercuts global manufacturing competitors on prices,” Louise Lu, chief economist at Oxford Economics, wrote in a note at the end of the report. April.

Lu said cyclical oversupply in the near term may be due to China’s economic problems, which have affected domestic demand, but it has not been a persistent problem over time.

However, this does not suit the West, which is trying to increase its onshore battery capacity through government incentives in markets including… United State, Canada, EuropeAnd India.

Chim Lee, a China analyst at the Economist Intelligence Unit, wrote in a note in mid-April that a “super cycle” in strategic sectors — such as electric cars and renewable equipment – ​​were politically charged.

“These sectors are highly politicized globally: falling prices can be seen as a result of government support, but they are also key to accelerating the green transition,” Lee wrote.

China’s global share of battery manufacturing capacity is expected to decline

Despite the West’s panic, there is a silver lining to the bloc. China’s global share of battery manufacturing is expected to decline in the coming years, according to a report by the Battery Research Institute International Energy Agency Published on Monday.

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China now accounts for more than 80% of battery manufacturing capacity, followed by the United States and the European Union with about 5% each, according to the International Energy Agency.

But China’s share of battery manufacturing could fall to about 60% by the end of the decade, while the United States and the European Union could each triple their share to about 15% thanks to disinflation legislation and policies to support energy transition commitments, according to the International Monetary Fund. International Energy Agency.

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