Paul

[Paul @LoveMePaul]

@ashfold @teortaxesTex 👀

[Paul @LoveMePaul]

@Brad_Setser

[Paul @LoveMePaul]

When it comes to defining “overcapacity,” even the most serious and authoritative economists might hesitate to draw conclusions—they might all be quite perplexed! This is an extremely difficult issue that cannot be defined solely by measures such as “trade surpluses”！

[Paul @LoveMePaul]

@Brad_Setser I agree with you that China is currently heavily dependent on exports and has a massive trade surplus! However, I disagree with your unreasonable claim that certain industries have achieved international competitiveness solely “through protectionism”!

[Paul @LoveMePaul]

@Brad_Setser by comparison, it is 78 percent in the United States and roughly the same in the European Union! So, in today’s era of economic globalization, does China really have overcapacity? Of course, the massive trade surplus is a problem, but it cannot simply be defined as overcapacity!

[Paul @LoveMePaul]

@Brad_Setser Overcapacity is also an issue that warrants serious discussion. The standard quantitative indicator for defining overcapacity is “capacity utilization rate.” In China’s case, this figure stands at around 76 percent

[Paul @LoveMePaul]

@Brad_Setser I agree with you that China is currently heavily dependent on exports and has a massive trade surplus! However, I disagree with your unreasonable claim that certain industries have achieved international competitiveness solely “through protectionism”!

[Paul @LoveMePaul]

@Elaina43114880 @teortaxesTex Of course, I hope I'm wrong!🤷

[Paul @LoveMePaul]

@Elaina43114880 It's highly unlikely that either of them will be released today! @teortaxesTex 🤣

[Paul @LoveMePaul]

THE crucial factor is that China’s long-standing lag in the field of internal combustion engines, coupled with concerns about energy security, has driven the aggressive electrification of the automotive industry.

[Paul @LoveMePaul]

There’s one aspect that’s been overlooked in this discussion of development—particularly regarding the development of new energy vehicles: Why has China been able to rise to prominence? This requires more than just the traditional approaches mentioned above

[Paul @LoveMePaul]

@Brad_Setser If you take a closer look at the history of China’s automotive industry, didn’t it start with preferential tax rates? And didn’t it also receive subsidies? Of course it did! Given China’s economic situation at the time, this was a perfectly reasonable approach!

[Paul @LoveMePaul]

@Brad_Setser Just like the development histories of other long-established automotive brands, China’s automotive industry has also gone through the process of “technology transfer, localized production, support for domestic brands, learning and improvement, and gaining competitiveness.”

[Paul @LoveMePaul]

It is simply impossible to define this as “protectionism”! “Protectionism” may allow you to monopolize a market, but it is absolutely impossible to build international competitiveness through it!

[Paul @LoveMePaul]

As for China’s new energy vehicle battery industry, did it make reasonable use of WTO rules? The answer is yes!

[Paul @LoveMePaul]

@Brad_Setser If you take a closer look at the history of China’s automotive industry, didn’t it start with preferential tax rates? And didn’t it also receive subsidies? Of course it did! Given China’s economic situation at the time, this was a perfectly reasonable approach!

[Paul @LoveMePaul]

Tesla enjoys subsidies and tax incentives in China because its vehicles are produced entirely in China! This is in line with the WTO’s principle of national treatment!

[Paul @LoveMePaul]

@Brad_Setser It’s an exaggeration to label a historical event as so-called “protectionism.” Since 2018, China has lifted the cap on foreign ownership stakes in the automotive sector, and Tesla has established a wholly-owned factory in Shanghai!

[Paul @LoveMePaul]

It’s also important to note that, starting in 2015, China gradually phased out the “battery white list” system and shifted completely toward an open market!

[Paul @LoveMePaul]

@Brad_Setser As far as China’s battery industry is concerned, a “whitelist” system did indeed exist, but it should be noted that the industry was still in its very early, rudimentary stages at the time, which was fully in line with the WTO’s principle of protecting “infant industries”!