The real issue is not overcapacity but competitiveness

An employee of CGN New Energy Holdings inspects solar panels at a power plant in Golmud, Qinghai province. [Photo/Xinhua]

French entrepreneur Arnaud Bertrand wrote recently on his social media X account that there is no sign of industrial overcapacity in China.

Bertrand explained that there are three key metrics to assess if a country has "industrial overcapacity", namely capacity utilization rates, inventory levels and profit margins, and China does not have any problems with these three key indicators.

He elaborated, over the past decade, that China's capacity utilization rate has been fairly stable and is now around 76 percent, not far behind the 78 percent in the United States. In terms of inventory levels, as of the beginning of 2024, China's PMI of finished goods inventory is about 49, which has not exceeded the red line of 50. In terms of profit margins, in the first two months of 2024, China's industrial profits increased by 10.2 percent, and have been growing since August 2023.

"No matter how you look at it, there is just no sign of industrial overcapacity in China," Bertrand wrote.

He pointed out the real issue is not one of industrial capacity but one of competitiveness.

He analyzed the industrial chain, talent, technology, energy price and innovation, and concluded that "Chinese enterprises are very competitive".

What is crystal clear is that the competitiveness of Chinese companies is overwhelming. Western leaders are afraid that if things keep going, their interests will be harmed, he wrote.

"The threat of China's industrial overcapacity" is a buzzword that actually means that China is simply too competitive, he pointed out.

Demonizing this is just not right, and it's certainly not the right way to ask China for what's an incredibly big favor: running less fast so the West can keep up, he highlighted.