China's Commerce Ministry Issues Lengthy Rebuttal Against Overcapacity Allegations
N.R. Finch
China's Commerce Ministry published a 10,000-word position paper systematically rejecting US and EU claims of "structural overcapacity" — Beijing's most comprehensive official response yet, timed just ahead of escalating US–China friction and the EU's October trade-deficit deadline.
What exactly is Beijing pushing back against?
The core US–EU charge: China uses subsidies to build structural overcapacity, flooding global markets with cheap goods that undercut domestic producers.
Vice Commerce Minister Yan Dong said some economies are "hyping" the issue; the paper aims to "clarify the facts."
This means → Beijing is no longer responding case by case. It has bundled every counter-argument into a single, state-level document — an attempt to reframe the narrative wholesale.
What are the paper's key arguments?
No universal standard for overcapacity — Beijing argues that capacity-utilization thresholds vary by country and industry, so no single number can define "excess." China's Q2 utilization fell to 73%, the lowest since early-2020 lockdowns, yet the Ministry calls it "within a reasonable range."
Surplus ≠ overcapacity — the paper notes that the US and EU run large trade surpluses in chips, aircraft, autos, and pharma, arguing this disproves the logic that "a surplus equals excess capacity."
Subsidies ≠ distortion — Beijing highlights its efforts to improve subsidy transparency and curb improper local-government incentives. The implicit message: every country subsidizes; singling out China is selective.
What does the 73% utilization rate actually tell us?
73% is the lowest since early-2020 pandemic lockdowns. The immediate cause: widespread production halts for safety inspections after coal-mine accidents.
In plain terms = the number is genuinely low, but Beijing attributes it to a temporary safety crackdown, not structural overcapacity.
This reflects a delicate position: the data objectively supports "utilization is declining," and Beijing must convince trading partners it is a short-term disruption, not a chronic condition.
Does Beijing's external message contradict its domestic policy?
Roughly a year ago, China's top leadership launched a campaign to curb excessive competition among firms — widely interpreted at the time as a move to address overcapacity.
That campaign yielded limited results: this year's inflation improvement came mainly from rising prices of imported commodities — oil, metals, chips — not from a domestic-demand recovery.
This means → Beijing denies "overcapacity" abroad while having tried to treat the same problem at home. US and EU negotiators will cite this tension repeatedly in coming talks.
What are the key dates to watch?
EU October deadline: the EU must decide how to handle its trade deficit with China — a test of whether substantive negotiations are possible.
US overcapacity investigation: Commerce Ministry policy chief Lin Weilong labeled it unilateralism and stated explicitly that China reserves the right to retaliate.
In plain terms = the paper is published, but the real contest plays out at the negotiating table. Until October and the US probe's conclusion, this 10,000-word document is more a bargaining chip than a final answer.
Content is for reference only, not financial advice.