China Issues Policy Position Paper Rejecting Western 'Overcapacity' Accusations

On July 28, 2026, China's Ministry of Commerce published an official position paper addressing Western accusations of industrial 'overcapacity.' Released simultaneously in Chinese and English across four core chapters, the document argues that industrial capacity is shaped by global market forces and international division of labor. Rejecting claims that subsidies or weak domestic demand drive structural overcapacity, Beijing framed its manufacturing growth as 'China Opportunity 2.0' and urged international partners to maintain multilateral trading rules and open supply chains.

The paper serves as Beijing's comprehensive legal and economic defense against mounting trade restrictions and tariff threats from Western economies. By formally framing its manufacturing scale as a key driver of the global green transition rather than an unfair trade practice, China is seeking to counter protectionist narratives while anchoring its arguments in multilateral trading principles.

On July 28, 2026, China's Ministry of Commerce (MOFCOM) published a comprehensive official position paper titled "China's Position on the So-Called 'Overcapacity' Issue," delivering a detailed rebuttal to Western accusations concerning Chinese industrial policies and export volumes. The document, released simultaneously in Chinese—spanning over 10,000 characters—and English, sets out Beijing's official stance across four core chapters examining global capacity evolution, specific economic relationships, domestic industrial modernization, and international supply chain cooperation. The ministry argued that the global distribution of industrial capacity is a natural consequence of economic globalization and international division of labor rather than state-directed distortion. Tracing historical industrial shifts from the United Kingdom and the United States to Europe, East Asia, and China, the paper noted that East Asia currently accounts for 38% of global manufacturing value-added, compared to 17% each for North America and Europe. MOFCOM stressed that capacity supply and demand exist in a dynamic cycle of balance and imbalance within market economies, making temporary mismatches a normal market phenomenon rather than systemic overcapacity. Rebutting specific trade arguments, the paper maintained that government subsidies do not inherently lead to overcapacity, urging major powers to set an example by adhering to international subsidy standards. It also rejected assertions that large export volumes or trade surpluses equate to overcapacity, attributing China's trade performance to scale efficiencies, continuous innovation, and expanding global demand for green and industrial products. MOFCOM further countered claims that weak Chinese domestic demand forces excess production overseas, asserting that China operates as both a leading manufacturer and a vital global consumer market. Describing China's industrial growth as "China Opportunity 2.0" rather than a global economic shock, the position paper cautioned that politicizing trade issues and enacting protectionist measures threatens global supply chain stability and long-term world economic growth. MOFCOM concluded by advocating for multilateralism, policy coordination, and open market principles to maintain an equitable international economic order.