Beijing says there is no overcapacity, but the empty containers tell a different story

A voice-over asks: “Amelia, tell me the truth, does China’s trade surplus mean overcapacity?” A young Chinese woman, sitting at a table, replies whilst drinking from a small decorated cup: “No, come on,” and smiles: “Let’s take an example.” Standing in front of a wooden panel bearing golden Chinese characters, Amelia launches into a rather bold comparison: she points out that ‘Made in Italy’ products – from fashion to cars – are also sold abroad, and that there are Italian products which sell better than others; hence the Italian trade surplus. Yet no one would ever dream of accusing Italy of overcapacity. A few days ago, the Embassy of the People’s Republic of China in Italy posted a rather rudimentary reel on its social media channels about a topic rarely discussed on buses or in cafés, but which is a top priority in the Chinese Communist Party’s communications abroad: to refute the European Union’s accusations regarding China’s production overcapacity by convincing ordinary people that this is a prejudice against the country, that it is America’s fault for not wanting China to grow and develop, and that the rules are not the same for everyone. This is such a glaring distortion of reality that it calls for a simplistic social media reel – the very place where anyone can say anything and still sound convincing (Amelia’s video currently has zero comments on either Instagram or TikTok, proving that to make a topic go viral, perhaps you really do need dance routines). The urgency felt by Chinese diplomatic missions in Europe, however, stems from a trade war we’re paying little attention to, yet which is already upon us. According to the European Commission, Chinese overcapacity is now a structural problem: China has developed production capacities exceeding domestic demand in certain sectors, often through subsidised credit, tax incentives, subsidies and industrial policies. And a state subsidy that enables companies to increase their production capacity is considered harmful to competition, as it can allow them to expand at the expense of their rivals. There is a very concrete way to measure the trade imbalance between China and Europe – and, more broadly, between China and the West – which is to count the number of empty containers returning.

According to an analysis published two days ago by FreightWaves, an American website specialising in freight transport and logistics, the growth in global trade this year has been accompanied by an increase in empty containers, driven primarily by Chinese exports. The result is that a growing number of containers must be repositioned to Asia without any cargo on board, incurring considerable logistics costs. At the port of Rotterdam, the number of huge empty metal containers handled in the first six months of the year rose by 60 per cent compared with the same period in 2020. Even in its official communications, Beijing rejects the idea that overcapacity is a specifically Chinese problem. In a document published last month by the Ministry of Commerce – which has even been translated into Italian – it argues that production capacity is a “natural consequence of industrial development, market volatility and the ongoing evolution of the international division of labour”. This interpretation serves to divert attention from the real crux of the European complaint, which accuses China of having built and maintained much of that production capacity through state intervention, and whose impact is now increasingly being felt on foreign markets – one need only look at the car sector: in the first half of this year, Chinese brands virtually doubled their share of the European car market compared with the previous year. But when Brussels tries to assess the extent of the subsidies, China responds by forbidding its entities from cooperating with the investigations. Just yesterday, the Ministry of Justice in Beijing ordered Chinese companies and citizens not to cooperate with the investigation launched by the European Commission in May into JD.com, one of China’s e-commerce giants. The EU wanted to investigate the Chinese group’s bid to acquire the German consumer electronics company Ceconomy. According to Beijing, the European investigation constitutes an “improper measure of extraterritorial jurisdiction”, and follows just a few months on from the same approach used in the EU’s investigations into Nuctech, the Chinese manufacturer of security scanners, into which Brussels had also launched an investigation last spring.