China rejects overcapacity claims ahead of potential fresh US tariffs

Hongkong,UPDATED: Jul 28, 2026 18:10 IST

China on Tuesday rejected claims that it has excess industrial capacity, ahead of the release of findings from a US investigation that could lead to fresh tariffs. The issue has come under growing focus as Chinese exports have surged and trading partners have raised concerns over sectors ranging from automaking and solar panels to cement and steel.

Beijing said it has never sought a large trade surplus and dismissed recent talk of a “China shock 2.0”. The response came as the US is expected to soon announce the results of a probe into 16 economies, including China, over excess capacity and manufacturing output, with higher tariffs on some countries widely expected.

In a report titled “China’s Position on the So-called Excess Capacity Issue”, China’s Ministry of Commerce said the country’s leaders have made rebalancing the economy a priority, but slowing domestic demand has pushed companies to expand overseas. Surging exports helped lift China’s trade surplus to a record of nearly USD 1.2 trillion last year.

The report said China has never sought a large trade surplus and criticised claims that its industrial growth threatens Western economies. “The US and other Western countries have come up with the so-called China shock 2.0,’ falsely accusing China’s industrial development of posing threats to western countries’ monopoly,” it said. “This is not supported by facts and totally untenable,” the report added.

The ministry’s document echoed remarks by Premier Li Qiang at the World Economic Forum’s “Summer Davos” meeting in Dalian, where he said recent trends should be seen not as a “China Shock 2.0” but as a “China Opportunity 2.0”.

At a press conference in Beijing, Lin Weilong, director of the Commerce Ministry’s policy research office, said the US has no authority to unilaterally decide whether its trading partners have excess capacity and then impose restrictive measures. “The US cannot narrowly define production capacity that exceeds domestic demand as excess capacity, and slap it with a surplus label,” Lin said.

The expected US findings come days after Washington imposed higher tariffs of 10 per cent to 12.5 per cent on 60 economies, including China, saying they had failed to effectively enforce a ban on goods produced with forced labour. China was among the countries that protested the move. Earlier this month, the European Union also introduced trade measures as it seeks to rebalance trade with China, including protections for its steel industry and restrictions on imports of e-commerce small parcels.

Alfredo Montufar-Helu, an expert on China at consultancy Ankura, said China’s position on the overcapacity issue is likely to “fall on deaf ears”. He said economic conditions in Western markets have made it politically difficult to do nothing as Chinese imports rise, especially in higher-value sectors that Western companies had long dominated. Overall, China used Tuesday’s report to push back against overcapacity claims as pressure from the US and Europe over trade continues to build.

With PTI Inputs

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