The Problem With “Overcapacity” in China’s Automotive Industry
The debate over China’s auto exports is bedeviled by narrow definitions and mis-measurement that risks encouraging the wrong policy response.
Rows of cars parked at a Geely auto plant in Hangzhou, Zhejiang. Credit: ChinaImages via Depositphotos
The U.S., EU, and Canada have recently imposed steep tariffs on imported Chinese-made electric vehicles (EVs). The justification for these measures is familiar and alarmist: China’s EV industry is producing more cars than it can sell domestically, and this “overcapacity” will flood international markets with low-priced vehicles, overwhelming and ultimately collapsing domestic auto industries. Sounds pretty scary, right?
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