China rejects ‘excess capacity’ claims, saying warming world needs more electric vehicles

He added that global demand for new electric cars would then reach 45 to 75 million units, which would significantly exceed the world’s current supply capacity, citing estimates from the International Energy Agency.

Liao spoke to Bloomberg News on Friday, a day after Yellen vowed to “continue to press China to address its macroeconomic model,” which she said is driving “too much” austerity and subsidies for production and contributing to excess capacity.

China is facing rising trade barriers with advanced economies such as the United States and the European Union, which complain about overproduction and its impact on their industries and businesses.

The EU is imposing tariffs on Chinese electric cars, and Republican Party candidate Donald Trump has threatened to impose tariffs of 50 percent or more on imports of Chinese goods if he wins the presidential election in November.

Some developing countries, including Brazil and Turkey, have also imposed tariffs on Chinese products including steel and cars, although they have not been as open critics of Beijing’s industrial policies.

Liao said China, while heeding concerns from major economies about overcapacity, is also concerned about trade risks such as tariffs.

“We should communicate honestly, respecting the principles of the market economy and true facts.”

Liao was a key member of China’s team of trade war negotiators who faced U.S. officials during the Trump presidency. He traveled to the U.S. as an assistant to then- Deputy Prime Minister Liu He and met with Trump in the Oval Office.

Liao recently welcomed Yellen when visited China in April.

02:22

US Treasury Chief Janet Yellen Leaves China After ‘Difficult Talks’, Complaints About Excess Capacity

At the Group of 20 meetings, differences in approach to China between rich countries and the global South were clearly visible.

Yellen condemned China’s economic strategy as a “threat to the profitability of companies and workers worldwide,” while Bundesbank President Joachim Nagel urged Brazil to cultivate ties with the West rather than rely solely on China to drive economic growth.

The Indian government’s chief economic adviser, V. Anantha Nageswaran, said the issue of excess production in China had not been raised during any of his delegation’s bilateral talks, though he admitted it was a “problem” for his country.

Brazilian Finance Minister Fernando Haddad said that while the reaction of some countries to China’s exports was an “understandable reaction”, it was not sustainable in the long run.

Liao said government subsidies were not the main reason Chinese industries like renewable energy gained a competitive advantage. More important factors were years of corporate investment in research and development, entrepreneurship and technological innovation.

“China’s experience of reform and opening up over the past 40 years has shown us that no industry can become globally competitive by relying solely on government support,” he said.

Liao also argued that some countries were lagging behind in the development of electric vehicles because they had a head start in the traditional car sector and therefore did not focus on the emerging industry.

China, in turn, has had to look for growth in new sectors, such as electric vehicles, due to its lack of an advantage in the traditional auto market.

Demand and supply imbalances were natural for any market economy, Liao said, partly because companies made their own investment decisions and did so with a long-term perspective, expecting to meet higher demand. Market forces would show whether they made the right decisions or not, he added.

He added that large capital flows into new industries were not uncommon, citing previous investment sprees in sectors such as information technology, shale gas and biopharmaceuticals that resulted in “temporary” excess capacity in developed countries.