China

Uprooting the ‘overcapacity theory’: Xiakedao

Published

3 weeks 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 When some countries’ industries fall behind, become outdated or suffer from domestic deindustrialization, they shift the blame onto others, claiming that China is at fault.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

Inside China’s first quantum-powered demonstration substation

Published

1 week ago

August 13, 2026

Our Reporter

By Xu Jing, People’s Daily

Quantum technology is beginning to transform the way China’s power grids operate. At the 220-kilovolt Houdian Quantum Application Demonstration Substation in Hefei, east China’s Anhui province, a suite of advanced quantum technologies is now in use. These include diamond-based quantum sensing materials to monitor current fluctuations, quantum-dot gas sensors to detect potential cable fire hazards and partial discharge faults inside switchgear, and other innovations that strengthen the intelligence, safety, and efficiency of grid operations.

Commissioned in November 2024, the facility is China’s first demonstration substation dedicated to the systematic application of quantum technologies. It has deployed 85 independently developed quantum devices across 18 categories, covering quantum sensing, quantum communication, and quantum computing.

The project represents a pioneering effort to integrate quantum technologies into power grid engineering, offering a new technological solution to the challenges faced by conventional power grids while supporting the development of a new-type power system.

The substation also represents a new generation of fully unattended intelligent substations.

“We have replaced many manual inspection tasks with high-precision quantum sensing equipment,” said Tian Teng, a young engineer at the digitalization institute of the electric power research institute under State Grid Anhui Electric Power Co., Ltd. “The new system can identify and diagnose equipment defects much faster, reducing both inspection costs and operating expenses.”

Inside the high-voltage switchgear hall, rows of power equipment operated steadily. Standing beside an out-of-service switchgear cabinet, Tian pointed to a small device mounted on its side.

“This is a quantum-dot multi-parameter sensor,” he explained. “It continuously monitors the cabinet’s internal environment and detects signals associated with partial electrical discharge, enabling us to assess the condition of the switchgear.”

He then pointed to another compact device attached to a cable beneath the cabinet.

“This is a distribution network current sensor. It monitors line loading in real time and can quickly and accurately locate faults along the transmission line.”

Quantum technologies are embedded throughout the facility — not just in these compact sensing devices.

Quantum technologies are embedded throughout the facility — not just in these compact sensing devices. A quantum lidar system installed on the rooftop monitors atmospheric particles and cloud conditions within a 15-kilometer radius, providing early warnings of weather-related risks. Quantum attitude sensors mounted on transmission towers can detect magnetic field changes as small as 1/10,000 of the Earth’s magnetic field, enabling highly accurate monitoring of tower alignment.

Besides, quantum encryption equipment supports both fiber-based quantum secure communications and “5G + quantum” encrypted communications, significantly enhancing cybersecurity across the power network.

The innovation extends beyond physical equipment. The substation has adopted a quantum computing-based approach for power flow analysis, which has been validated using the topology of a real-world power grid on Origin Wukong, China’s domestically developed quantum computer.

“This breakthrough provides an entirely new technical approach for large-scale power grid simulation,” Tian said. “It is expected to further improve the real-time analytical and computing capabilities of power systems.”

Why did China build this quantum-powered substation?

According to Tian, conventional power grids are increasingly facing three major challenges as renewable energy and power-electronics-based equipment become increasingly widespread: limited accuracy in equipment condition monitoring and delayed response; insufficient security for data transmission and control instructions; and the computational limitations of conventional computers when making rapid decisions for increasingly complex grid operations.

Developing a new-type power grid supported by quantum technologies has become an inevitable choice, he said.

Developing the necessary equipment, however, was far from straightforward.

There were no domestic precedents, no established standards and no mature technical solutions to follow, said Zhao Long, head of the power quantum sensing laboratory at the electric power research institute under State Grid Anhui Electric Power Co., Ltd.

“The biggest challenge came when supplies of high-quality diamond sensing materials were cut off by overseas suppliers, bringing the project close to a standstill,” he added.

The team eventually partnered with domestic materials researchers to develop customized alternatives. After repeated rounds of experimentation and testing, they achieved a breakthrough.

New engineering challenges soon emerged, including electromagnetic interference and adapting laboratory technologies to real operating conditions.

“For several consecutive months, we spent our days at the substation collecting data and tuning system parameters, and our nights back in the laboratory refining algorithms and improving packaging and shielding designs,” Zhao recalled.

“When the quantum current transformer finally displayed accurate readings on the monitoring screen, everyone on the team burst into applause. We had successfully bridged the ‘last mile’ from laboratory research to real-world engineering.”

According to project estimates, the application of quantum technologies enables the Houdian demonstration substation to reduce annual electricity measurement errors by more than 500,000 kilowatt-hours, while significantly improving the reliability and economic efficiency of grid operations.

Several quantum technologies first demonstrated at the substation have since been deployed elsewhere across Anhui province and are now being introduced to more regions across China.

China

Chinese robots expand global reach through diverse applications

Published

2 weeks ago

August 12, 2026

Our Reporter

By Ouyang Jie, Liu Junguo, People’s Daily

From factories and power plants to warehouses and emergency response sites, Chinese-made robots are increasingly being deployed across a wide range of applications worldwide.

This expansion reflects not only the rapid growth of China’s robotics industry but also the ability of Chinese companies to develop products tailored to diverse market needs, improve service capabilities, and build localized operations overseas.

At the assembly workshop of Pudu Robotics, a Chinese service robotics manufacturer located in Jianhu county, east China’s Jiangsu province, five production lines were running at full capacity for 10 hours.

Workers at assembly stations were installing new batches of lidar modules into robot bodies. The company’s production schedule has already fully booked through 2027, with factory production plans significantly tighter than last year.

Founded in 2016, Pudu Robotics has focused on the global commercial service robot market. It has shipped more than 130,000 units and served over 50,000 end customers worldwide.

Since the beginning of this year, the company’s exports have already exceeded the total volume of the previous year, with products sold to 85 countries and regions. Its cleaning robots, in particular, have maintained year-on-year export growth of more than 100 percent for consecutive years, accounting for 29 percent of the global commercial cleaning robot market.

Pudu Robotics is just one example of Chinese intelligent robot companies expanding into overseas markets. According to customs data from Shenzhen, south China’s Guangdong province, exports of various types of robots from Shenzhen reached 6.94 billion yuan ($1.03 billion) in the first half of this year, representing a tenfold increase year-on-year. These products were shipped to more than 110 countries and regions.

Strong technological capabilities are at the core of the global competitiveness of Chinese manufacturing.

“Our quadruped robots have officially started operations at a nuclear power plant in Switzerland, carrying out frequent and routine autonomous inspections in high-risk areas,” said Yao Hengyan, assistant general manager of DEEP Robotics in Hangzhou, east China’s Zhejiang province.

The robot can climb slopes as steep as 45 degrees, navigate narrow spaces between equipment and access areas that are difficult for humans to reach. Equipped with thermal imaging and acoustic sensors, it can accurately detect potential hazards such as leaks, abnormal temperatures, and unusual equipment noises.

Inspection data is uploaded in real time to a digital management platform, which can automatically issue alerts and initiate responses once anomalies are detected.

Besides, the quadruped robots of the company are also used for factory security and underground pipeline inspection in Switzerland.

A diverse product portfolio has enabled Chinese robots to adapt to a broad range of global application scenarios.

Pudu Robotics has divided the market into 16 major industries and more than 800 categories of specific applications and tasks based on customer needs, said Zhang Tao, founder and CEO of the company. The company has continuously optimized the overall performance of its products to ensure they are “functional, user-friendly, and durable” in complex environments.

It has established four major product lines covering delivery, cleaning, industrial, and general-purpose embodied intelligence robots, with applications spanning multiple sectors, including manufacturing and warehousing logistics.

The successful deployment of DEEP Robotics’ quadruped robots at a Swiss nuclear power plant, where safety standards are extremely demanding, demonstrates the stability and reliability of China-made robots, Yao said.

The company has reached an agreement with its Swiss client to expand cooperation, and its robots, which can adapt to complex terrain and extreme weather conditions, have already been deployed in energy, industrial, and emergency response scenarios in various parts of the world.

As they continue to explore overseas markets, many Chinese robotics companies are shifting from simply exporting products to building localized brands and service networks.

Competition in China’s service robot sector has moved beyond price-performance advantages and entered a new stage where quality, brand recognition, and service capabilities are equally important, Zhang said. Customers are looking for not just a machine, but a comprehensive solution that can operate reliably over the long term.

To meet these needs, Pudu Robotics has established local offices and service centers in major global markets and built a cooperation network involving more than 1,000 distributors. The network provides partners with full-process support, including pre-sales consultation, sales assistance, deployment, after-sales maintenance, and rapid spare parts response, helping customers overcome concerns about adopting complex technologies.

The current penetration of robots remains relatively low, leaving broad room for future growth, Zhang said. As robots become increasingly integrated into various industries, different application scenarios will require different types of robots and capabilities. The company hopes to develop a unified “intelligent brain” for robots that can empower various products in fields such as delivery, cleaning, and industrial applications.

Pudu Robotics will continue expanding investment in technological innovation and product upgrades, making robots increasingly intelligent and capable of serving more industries worldwide, Zhang added.

China

Wuxi’s “Token Supermarket”: A one-stop AI model platform for local businesses

Published

2 weeks ago

August 12, 2026

Our Reporter

By Yao Xueqing, People’s Daily

When Li Tao, the software department supervisor at Sevice — a security technology company based in Jiangsu — opened Wuxi’s AI industry service platform, he navigated straight to the “Token Supermarket” on the homepage. He logged into his account to check usage metrics and his remaining balance.

Li’s company specializes in intelligent security, with software development as its core business. “Since last year, AI has handled 85 percent of our software development workflows,” Li said. The company needs to purchase tokens from various large language model platforms, with fees calculated based on usage.

Initially, the company’s demand for tokens was limited, and the cost was almost negligible. But as computing needs grew rapidly, monthly expenses increased. Different large models have different capabilities and applications, Li said. Companies not only have to cope with rising costs, but also manage and maintain multiple accounts and switch between different models, he added.

In May this year, Wuxi rolled out this city-level “Token Supermarket.” Li Tao visited the platform the very day it went live. Lined up on its virtual “shelves” were over 20 mainstream large models, covering nearly all those widely adopted by enterprises.

Thanks to the platform’s centralized procurement, most offerings are available at favorable rates. Even more convenient, users need only a single registered account to call upon different large models on demand.

The company immediately decided to register with the “Token Supermarket” and top up its account. Li did the math: with a monthly recharge of 20,000 yuan ($2,963), more than 30 engineers can use 4 billion to 5 billion tokens. The complimentary concurrent-access benefit package has also enabled more than 30 employees to work efficiently in parallel.

As a result, the company has cut research and development costs by nearly 30 percent, shortened software development cycles from two weeks to less than one week, and increased efficiency by 50 percent.

Why did Wuxi launch such a “Token Supermarket,” and what makes it unique?

According to Zhu Yiqing, deputy general manager of Wuxi Digital New Infrastructure Co., Ltd., which operates the platform, token usage is growing rapidly, but companies still face challenges such as high costs, complicated management of multiple AI model accounts and difficulties in calculating expenses.The “Token Supermarket” was developed to provide a one-stop purchasing platform and has already served more than 50 enterprises.

Its customers include not only companies like Li’s that purchase tokens to assist with daily office work, but also many enterprises that buy tokens as “bulk raw materials” for further processing and development.

Dramasmaker, a startup developing AI-powered animated storytelling production tools, is one such customer. The company was founded in August last year and spent more than six months independently developing a one-stop animation production system, which entered the testing and production phase in May of this year, said general manager Wei Jianfei.

The company needs to purchase large amounts of tokens, resulting in high costs. During the early startup stage, this placed considerable pressure on its cash flow, Wei said.

Zhu noted that the “Token Supermarket” can also be connected with financial services, with financial products to be integrated into the platform’s payment system.

Notably, staff members of the “Token Supermarket” are currently sprucing up its virtual premises: alongside an existing “brand zone,” a new “local-source offerings zone” has been rolled out.

According to Zhu, Wuxi’s computing-power industry is developing rapidly, with 19 intelligent computing centers now up and running, most of which deliver computing power for immediate sale.

Tokens generated by these intelligent computing centers are listed on the “Token Supermarket,” bringing cost-competitive options for users. The platform also bolsters the local computing-power sector while serving small and medium-sized enterprises.