China

Uprooting the ‘overcapacity theory’: Xiakedao

Published

3 months ago

August 1, 2026

By Xiakedao

Workers produce electronic components for exports at a factory in Xinle, North China’s Hebei Province, on June 16, 2026. Photo: VCG

In psychology, there is a concept known as “attribution theory”: People tend to attribute their successes to internal factors, such as their own efforts, while attributing their failures or problems to external factors.

This tendency is especially pronounced among trade protectionists. When some countries’ industries fall behind, become outdated or suffer from domestic deindustrialization, they shift the blame onto others, claiming that China is at fault.

In response to these phenomena – politicizing trade issues, hyping up the “overcapacity” problem in China, and escalating restrictions on the country – the Chinese Ministry of Commerce officially released a document titled “China’s Position on the So-called Excess Capacity Issue.”

The 12,000-word document essentially uproots the “overcapacity theory” in one fell swoop.

What does overcapacity mean? Does large production capacity necessarily mean overcapacity?

Simply put, overcapacity occurs when supply exceeds demand. However, market supply and demand are in constant flux. For example, refrigerators sell very well in summer but less so in winter. We cannot conclude that production is insufficient based solely on summer demand, nor can we conclude that there is overcapacity based solely on winter demand.

The document clarifies that excess capacity is a dynamic phenomenon in the market economy. Capacity supply and demand in the world economy go through the dynamic cycle of “balance – imbalance – rebalance”, without lasting capacity balance. Whether there is surplus capacity depends on supply and demand with dynamic adjustments in the life cycle of the industry. Supply-demand balance is relative, while imbalance is universal.

As a complex concept, excess capacity should be approached from the perspective of macroeconomic scenarios instead of a narrow focus on the absolute level of capacity and a limited perspective confined to a particular time or region. There are no globally accepted criteria for determining the reasonable range of capacity utilization, as it differs across economies. Data from relevant institutions indicate that the median capacity utilization rate for advanced and fast-growing economies mostly falls in the 75-80 percent range, whereas that for less developed countries usually stands between 50 percent and 64 percent.

As the “world’s factory” and “world’s market,” China’s industrial capacity utilization rate is generally within a reasonable range. In 2025, China’s industrial capacity utilization rate for enterprises above a designated size reached 74.4 percent, with high-tech manufacturing, high-end equipment manufacturing, and strategic emerging industries utilizing capacity more fully. The capacity utilization rate in some traditional raw material industries was temporarily lower, mainly due to adaptive adjustments brought about by structural reforms and green transformation.

Xu Yingming, director of the Institute of International Market Studies at the Ministry of Commerce’s Research Institute, said that judging a country’s capacity utilization rate is generally done by comparing it with its long-term equilibrium or average value. The long-term average capacity utilization rate in the US from 1967 to 2007 was 81.4 percent, while the average from 2008 to 2021 was 76.1 percent, a decrease of 5.3 percentage points.

In contrast, in the past three years, China’s average capacity utilization rate in key sub-sectors such as general equipment manufacturing and electrical machinery and equipment manufacturing has remained within a relatively healthy range, basically close to the average capacity utilization rate since 2006.

Regardless of whether trade protectionists are genuinely confused or feigning ignorance, the document provides an objective analysis of the relationship between industrial subsidies, trade surpluses, economic imbalances, market competition, and “overcapacity,” offering a solid and factual reality check.

For example, there is no necessary link between industrial subsidies and overcapacity. Multiple reports from the UN Conference on Trade and Development indicate that the number of global industrial policies has grown rapidly in the past five years, with providing research and development subsidies, tax incentives, and low-interest loans to emerging industries becoming international practices. Reasonable industrial subsidy policies help correct market failures, promote technological innovation, environmental protection, poverty reduction, and balanced development, and do not cause “overcapacity.”

A large trade surplus does not necessarily mean overcapacity. Eighty percent of US-produced chips are exported, and about two-thirds of Boeing’s commercial aircraft are sold to customers outside North America; the EU’s 2025 trade surpluses in automobiles, pharmaceuticals, and cosmetics reached $92.2 billion, $214.6 billion, and $11.6 billion respectively. China does not deliberately pursue a trade surplus. In the first half of the year, China’s merchandise imports grew 22.1 percent, significantly faster than exports. Foreign-invested enterprises contributed 16 percent of China’s trade surplus in 2025 and reaped substantial returns. “The surplus is in China, but the benefits are shared by all parties.”

The claim that “insufficient domestic demand in China leads to excess capacity” is also inaccurate. According to World Bank purchasing power parity calculations, China’s total retail sales in 2025 were equivalent to 1.7 times those of the US, making it the world’s largest consumer market for goods. China ranks No.1 globally in physical goods consumption, and per capita annual consumption of some industrial products is approaching the levels of developed countries.

In fact, market competition itself is the most effective mechanism to prevent disorderly expansion of production capacity; otherwise, unsold goods, losses, and market elimination will occur. The number of market entities in China has exceeded 200 million, creating a highly competitive market environment. A survey by the US-China Business Council shows that 92 percent of surveyed US companies were profitable in China in 2025, and a survey by the European Union Chamber of Commerce in China shows that 75 percent of companies believe their production efficiency in China is higher than in other parts of the world.

Cui Fan, a professor at the University of International Business and Economics, said that the document’s discussion of four pairs of relationships clarified some vague and erroneous understandings prevalent internationally regarding the issue of production capacity. For example, if issues such as climate change are left entirely to the market to resolve, it may not meet the urgent need for low-carbon emission reduction. Only a combination of an effective market and a capable government can better address these challenges.

Data from the International Renewable Energy Agency shows that over the past 10 years, the average cost per kilowatt-hour for global wind power and solar power has cumulatively decreased by over 60 percent and 80 percent respectively, largely thanks to Chinese innovation, Chinese manufacturing, and Chinese production capacity.

The purpose of uprooting the “excess capacity theory” is not to engage in verbal battles, but to clarify doubts and promote win-win cooperation. As the document states, mutually beneficial and pragmatic cooperation on industrial and supply chains that makes the pie of global development bigger serves the common interest of all countries.

In recent years, China has continuously expanded its opening-up, reduced import tariffs, expanded the opening-up of service trade, and implemented a strategy to expand domestic demand, Cui said. For some products with rapid export growth that are prone to trade friction, China has proactively reduced or canceled its export tax rebates to maintain export order. The decline in industrial competitiveness in some economies is not due to “excess capacity” in China. China has been actively expanding imports, promoting balanced import and export development, and providing more market opportunities for its trading partners.

The data speaks for itself: China has ranked second globally in imports for 17 consecutive years and is a major export destination for nearly 80 countries. It has also implemented zero-tariff on 63 countries, making it the first major economy in the world to achieve full coverage of zero-tariff coverage for all African countries with which it has diplomatic relations, as well as all least developed countries that maintain diplomatic ties with it. China is the only country in the world to host the China International Import Expo. Having successfully held eight sessions, the expo has achieved a cumulative intended transaction volume exceeding $580 billion. During the 14th Five-Year Plan (2021-25) period, the cumulative import volume surpassed 90 trillion yuan ($13.3 trillion).

These facts point to an irrefutable conclusion: China is not only an increasingly powerful “world factory,” but also a vibrant “world market.” China’s modern industrial development is not a “China shock 2.0” for the world, but rather a “China opportunity 2.0.”

China

Grassland city in N China’s Inner Mongolia transforms into an AI computing hub

Published

1 day ago

October 26, 2026

Our Reporter

By Yu Guangjun

How long does it take to travel from Ulanqab in north China’s Inner Mongolia autonomous region to Beijing? By high-speed rail, roughly 100 minutes. Yet data traverses the same distance — more than 240 kilometers — in just 2.1 milliseconds via high-capacity fiber-optic cables.

Harnessing its abundant wind resources and cool climate, Ulanqab is rapidly emerging as a major computing hub. As of the end of August, the city had secured agreements for 109 computing projects, covering more than 7 million standard server racks, with 190,000 petaflops of computing capacity already in operation.

A Goldman Sachs report says that Ulanqab has emerged as one of the largest and fastest-growing AI computing clusters in the Asia-Pacific region.

How did a once-isolated city with limited industrial diversification become a rising force on the national and global stage?

For generations, Ulanqab’s harsh winters, low rainfall, and brief growing season constrained traditional agriculture. Its economy has long depended on farming and livestock, leaving many communities vulnerable to climatic fluctuations.

The city was once a key target of China’s poverty alleviation campaign. Over the decades, Ulanqab has earned a string of nicknames, including China’s “potato capital,” “oat capital,” and “wind power capital,” each reflecting its distinctive geography and economy.

Times have changed. Driven by the “East Data, West Computing” initiative, Ulanqab, this once austere landscape, is breaking free from the constraints of its traditional development path, rapidly emerging as a hub for cloud computing, AI computing, and token production. Behind this transformation lies a reimagining of how its natural resources can drive development.

Computing infrastructure requires enormous physical facilities. Servers run around the clock, creating two major challenges: securing a reliable power supply and dissipating the heat they generate.

This gives the computing industry different location priorities from traditional manufacturing. It does not necessarily need to be near densely populated cities; instead, it places greater emphasis on energy costs, climate, and available land. In this new equation, Ulanqab’s traditional geographic disadvantages are becoming assets in the digital age.

Take wind energy first. Ulanqab experiences 60 days of strong winds in spring alone. Combined with an annual solar radiation of 5,500-6,200 megajoules per square meter, these conditions give the city abundant wind and solar resources. Its wind and solar farms rank among the nation’s leaders in annual utilization hours, and installed renewable energy capacity has reached 20.67 million kilowatts.

Computing is an electricity-intensive industry. The more servers a data center operates and the greater its computing capacity, the more power it needs. Ulanqab’s wind and solar resources, once of limited use to traditional industries, now align with the massive electricity demand of data centers.

Cold weather carries new meaning here too. For traditional agriculture and livestock farming, low average temperatures and a short frost-free season limit the growing season. For data centers, however, the same cold climate offers a natural source of cooling.

Ulanqab’s average summer temperature is just 18.8 degrees Celsius, and the region enjoys nearly 10 months of natural cooling each year. Large data centers can use cool outdoor air to dissipate heat, reducing energy consumption by an estimated 30 percent. What once constrained agricultural production has become an economic resource that directly lowers computing costs.

Then there’s proximity. “Just a ‘step’ west of Beijing lies Ulanqab” is a slogan that captures the city’s close proximity to the capital. Ulanqab is over 300 kilometers from Beijing. For traditional goods, that distance can mean lengthy transport times and high logistics costs. For data, however, a dedicated 144-fiber, dual-route link to Beijing enables ultra-low-latency transmission.

Powered by green electricity, natural cooling and ultra-low-latency connectivity, Ulanqab is meeting growing demand from the Beijing-Tianjin-Hebei region for AI training, autonomous driving R&D and big data processing.

By converting its natural and geographic advantages into digital hub strengths, the city is emerging as a green computing powerhouse. Leading companies in AI and smart vehicles are setting up operations there, driving the development of a full industrial chain spanning computing infrastructure, hardware manufacturing, cybersecurity, data services and talent training. Ulanqab is emerging as a key hub in China’s integrated national computing network.

Ulanqab is evolving from a transportation hub into a computing hub, unlocking new avenues for growth in the digital economy.

China

A conversation with Liu Cixin: From The Three-Body Problem to the future of humanity

Published

1 day ago

October 26, 2026

Our Reporter

By Chen Yuanyuan, People’s Daily

In 2006, Chinese science fiction writer Liu Cixin’s novel The Three-Body Problem began appearing in serial form in Science Fiction World magazine. Two decades later, the novel has not only made its mark on the world stage but also offered a lens through which to examine real-world developments. Artificial intelligence (AI), commercial spaceflight, and interstellar exploration are advancing at a remarkable pace, as humanity sets its sights on the far reaches of space. Recently, People’s Daily spoke with Liu about science fiction and the future of human civilization.

Q: What were you thinking when you first wrote The Three-Body Problem? How have your perspectives evolved since then?

Liu Cixin: Twenty years ago, as I typed The Three-Body Problem on a computer in my office deep in the mountains, I never imagined it would find such a large readership. First and foremost, The Three-Body Problem is a work of popular fiction, intended above all to tell a story that leaves readers stunned.

If I could step back into that moment, I might hesitate before including some of the darker themes woven into the story. They were originally narrative devices meant to engage readers, yet they have since been widely interpreted as reflections of what I later termed “cosmic sociology.” With such a vast readership today, I sometimes feel I have lit a fire that now burns beyond my control.

My fundamental worldview has remained unchanged over the past two decades. However, writing has grown more difficult. Generating fresh concepts for science fiction is increasingly challenging. On the one hand, AI is advancing rapidly. I am not worried about being replaced just yet, but what about 10 years from now? If AI can produce a superior manuscript in five minutes that would take a human writer five months to craft, what role will authors still play?

On the other hand, science fiction has permeated almost every aspect of our lives and society. Paradoxically, this has diluted its identity as a distinct literary genre, making it harder for science fiction writers to thrive as its influence continues to spread.

Contemporary Chinese science fiction is remarkably diverse. Younger writers often bring broader knowledge, wider perspectives, and a more nuanced understanding of how emerging technologies reshape society and everyday experience.

Q: What is your view of AI?

Liu Cixin: Most people are preoccupied with whether AI will replace or conquer humanity. My attitude is somewhat unconventional: I have a strong affection for AI.

Humans are inherently limited in intelligence, physical endurance, and cognitive capacity. We evolved to survive in the wilderness, not to explore the universe. Given our current capabilities, human civilization will never be able to expand beyond Earth into the wider universe.

AI, however, could help us overcome those innate limitations. Humanity’s grandest aspirations and ultimate goals could ultimately be realized with AI as a catalyst. AI points toward the future of Earth-based civilization. That future may not belong to humans, but it will still be meaningful.

In my personal routine, I rarely use AI. I treat it primarily as an advanced search tool. I have never used it to write fiction. Most of my creative time is devoted to developing story concepts, and AI still falls short in generating genuinely original, paradigm-shifting ideas that have never existed before.

Q: How should we prepare for a potential technological singularity?

Liu Cixin: As I understand it, the singularity refers to a point at which AI’s intelligence rapidly surpasses that of humans, bringing about unimaginable changes to all existing forms of human society, as well as to our political and economic systems. But this scenario may be an oversimplification.

Even if AI does advance at that speed, humanity still has many cards to play and can take various measures to guard against negative consequences. More likely, related technologies, such as human-machine integration and brain-computer interfaces, will also advance rapidly alongside AI. We may then see humans and AI increasingly merge with each other. As the saying goes: if we cannot compete with it, we might learn to integrate with it.

Q: What are your hopes for the future of space exploration?

Liu Cixin: I hope humanity will travel ever farther into space. Since the Apollo 11 moon landing, space has felt increasingly within our reach. I hope we can explore deep space, travel to Mars and the asteroid belt, and reach more distant celestial bodies, including the moons of Jupiter. We must keep looking outward, aiming for the farthest reaches of the observable universe.

If I were to travel to space, my priority would be to press my face against a viewport and gaze back at Earth. If I could witness just one moment in the universe, I would want to see the emergence of a truly intelligent civilization — to confirm that we are not alone and that cross-species communication is possible.

We now find ourselves in 2026, the very year in The Three-Body Problem when humanity is at its most bewildered and fearful in the face of an extraterrestrial crisis. Fortunately, reality has spared us from such a civilizational catastrophe, though new challenges continue to emerge worldwide.

As we navigate toward tomorrow, The Three-Body Problem remains a vital chapter in our cultural history. I eagerly await the next generation of visionary science fiction that captures the spirit of our era, charting a course toward the boundless sea of stars.

China

Why the world is looking east: The growing global appeal of China’s innovation ecosystem

Published

6 days ago

October 21, 2026

Our Reporter

By Li Hongxing, People’s Daily

One way to gauge a region’s appeal to investors and entrepreneurs is to listen to those already embedded in its ecosystem. Take a European founder based in Shenzhen, south China’s Guangdong province, who has called the city home for over a decade. He reports receiving daily inquiries from overseas startup leaders eager to visit, explore partnerships, or establish operations in China.

The steady stream of visitors eager to explore Shenzhen and its tech companies offers a glimpse into the growing global interest in China’s innovation ecosystem.

This is no fleeting trend. It underscores investors’ confidence in China and their optimism about the country’s prospects. The steady flow of overseas technology delegations, increasingly regular cross-border business discussions, and growing interest in “looking east” go beyond conventional economic and trade ties. They offer a vivid illustration of how the world is gaining a new understanding of China and seeking opportunities for cooperation and shared development.

Increasingly, entrepreneurs, researchers, and investment institutions from around the world are traveling to China to learn firsthand about its innovation mechanisms, industrial dynamics, and development pathways. Looking back at China’s evolving economic and trade ties with the world, this surging eastward focus marks a profound shift and more comprehensive, objective recognition of China’s development.

This transition from trade-centric partnerships to co-innovation rests on tangible structural advantages. Foremost among them is industrial resilience. While several major economies face deindustrialization pressures and cyclical volatility, China has maintained steady growth alongside continuous upgrading. Its comprehensive manufacturing base, extensive infrastructure networks, and large domestic consumer market provide a natural shock absorber, enabling predictable expansion even amid global headwinds.

Clustering amplifies this advantage. At a robot industrial park in Foshan, Guangdong province, for example, more than 90 percent of the components and other products needed across the supply chain can be sourced within the park. A design revised in the morning can undergo testing on the very same day. Industrial clustering, closely connected supply chains, consistent policies, and an open, inclusive market give investors at home and abroad the confidence to make long-term commitments and develop their businesses in China.

If industrial resilience provides the foundation, China’s vibrant innovation ecosystem and the rapid development of new quality productive forces are what give the country its enduring appeal.

Confidence in China’s development rests on its innovation capabilities. From basic research to practical applications, breakthroughs are emerging across a wide range of technological fields.

These efforts are yielding visible results. In northwestern China, renewable energy projects in the Gobi Desert are powering data centers, transforming cities such as Ulanqab in Inner Mongolia and Qingyang in Gansu province into key nodes in the national computing network.

Meanwhile, in Hefei, east China’s Anhui province, the experimental nuclear fusion device known as an “artificial sun” and the Zuchongzhi 3.0 quantum computing prototype continue to set world records, strengthening China’s position in frontier technologies.

A recent report released by the World Intellectual Property Organization shows that China has 25 of the world’s top 100 innovation clusters, ranking first globally for the fourth consecutive year.

The more China innovates, the more the world stands to benefit. Some international observers have noted China’s increasingly important role in the global innovation ecosystem, while others have praised Chinese developers for pushing the boundaries of innovation every day. From quantitative growth to qualitative breakthroughs, and from individual advances to progress across entire systems, the vitality and rapid development of China’s innovation sector demonstrate that innovation can be made anywhere, and that practical action is what turns pioneers into leaders.

A strong industrial foundation and vibrant innovation are not enough on their own. They also need a favorable environment where they can flourish. By further opening up and continuously building a first-rate business environment that is market-oriented, law-based, and internationalized, China is strengthening the institutional foundations for attracting global resources and building momentum for shared development.

The advantages of this environment are reflected in more targeted services and the effective implementation of practical policies. Across China, for example, policies on entry visas, length of stay, residence, and support for integration are being improved to help foreign professionals put down roots, develop their careers, and grow their businesses.

From more targeted industrial policies and efficient government services to robust intellectual property protection and an open, diverse innovation culture, China is introducing concrete reforms that make its environment more inclusive and its institutions more supportive, further enhancing its appeal as a place to develop and invest.

Looking beyond the surface reveals the deeper reasons behind the growing interest in China’s innovation ecosystem. The visible sign is the steady stream of visiting delegations; beyond that lie expanding opportunities for cooperation; at the deepest level is global confidence in China’s industrial strength, innovation capabilities, and institutional environment. Against the backdrop of global industrial transformation and rapid technological change, this interest reflects a rational assessment by market participants.

Looking ahead, China will continue to consolidate its foundations for development with the same persistence as a craftsman driving a nail, pursue new heights in innovation with the determination of a climber, and expand international cooperation with an open and inclusive mindset. By doing so, China can turn the growing global interest in “looking east” into mutually beneficial outcomes, demonstrating that China’s success can contribute to a better future for the world.