China Rejects 'Overcapacity' Claims, Citing Expanding Domestic Market

China has pushed back against foreign accusations that weak domestic demand is driving industrial overcapacity and export spillovers. Citing a recent position paper from the Ministry of Commerce and commentary published by People's Daily, Beijing argues that domestic demand remains the primary driver of its economy. According to official figures, domestic demand contributed an average of 93 percent to economic growth between 2013 and 2024. Officials emphasize that slowing retail sales growth reflects a structural transition toward service consumption rather than an overall lack of demand.

As trade tensions persist between China and major Western economies over green technology and industrial exports, Beijing is utilizing official policy papers and state media commentary to frame its economy as a major global consumption hub. By emphasizing its large market scale and rising import volumes, China seeks to counter protectionist trade measures and reframe international debates on global manufacturing imbalances.

China's Ministry of Commerce recently issued a position paper addressing foreign criticisms regarding Chinese industrial capacity and trade imbalances, accompanied by commentary published in state media outlets including People's Daily. The publication directly counters assertions that insufficient Chinese domestic demand is driving structural overcapacity and spilling over into global markets. According to official figures highlighted in the report, domestic demand served as the main engine of China's economic expansion between 2013 and 2024, contributing an average of 93 percent to national economic growth. Within that total, consumption and investment contributed an average of 55 percent and 38 percent, respectively. Total retail sales of consumer goods rose from 23.8 trillion yuan in 2013 to 50.1 trillion yuan in 2025. Converted using World Bank purchasing power parity rates, China's total retail sales in 2025 reached 1.7 times the level of the United States. Addressing arguments that recent slowdowns in retail sales growth signal weak domestic demand, official commentary argues that the shift reflects China's structural transition from high-speed growth to high-quality development. The composition of Chinese consumer spending is shifting from a primary focus on physical goods toward a balance between goods and services. Official projections estimate that service consumption will account for more than half of total consumer spending by 2030. The report also emphasizes China's role as a global import destination, noting that the country's import volume has ranked second worldwide for 17 consecutive years. China serves as a primary export market for nearly 80 countries and has granted zero-tariff treatment to 63 nations, including all least-developed countries and African nations with established diplomatic relations. Looking forward, China's 15th Five-Year Plan outline places special emphasis on expanding domestic demand as a strategic anchor. Planned measures include launching dedicated initiatives to boost consumer spending, upgrading physical commodity consumption, expanding service sector potential, and encouraging effective investment to achieve a higher-level equilibrium between supply and demand.