China's industrial overcapacity - Coface

China’s industrial overcapacity is prevalent in more sectors and faces more global pushbacks this time, compared to past episodes. This situation is not as severe as in 2016 but risks worsening if domestic demand fails to absorb the new capacity expansions. Overcapacity is no longer confined to specific sectors (textile and home appliances in late 1990s, and steel and aluminum in the 2010s), but has spread across traditional and emerging sectors. For the current round, we see idle capacity most evident in consumer goods (food, medicine), construction-related materials (cement, glass), and machinery and transportation equipment (automobiles). Our estimates show there is enough excess capacity in China to potentially double the exports of new energy vehicles and lithium batteries. With rising protectionist tendencies globally, the Chinese excess capacity has triggered trade disputes and retaliatory actions, centering on green technology products.

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