Possibility of 'Dumping' Amid Battery Overproduction in China... Will the Trade War Escalate?

Over 10 Years Ago, China's Steel Overproduction
Dominated Global Market with Low Prices
Clashed with Obama Administration and Trade Disputes

China's battery production volume significantly exceeds domestic demand, raising concerns about 'dumping' (selling at low prices). Previously, China dominated the global market and harmed the operating profit margins of overseas companies through low-price offensives in the steel and aluminum industries.

According to market research firm CRU Group on the 3rd (local time), China's battery factory production capacity this year is 1,500 gigawatt-hours (GWh) annually. This is enough to supply battery cells for 22 million electric vehicles, more than twice the total demand of 636 GWh across the Chinese mainland.

Western battery companies are concerned about the possibility of a 'low-price offensive' by Chinese companies. There is a risk that the overproduced batteries could be dumped in overseas markets. Chinese companies, which have already lowered operating costs through massive production capacity and government subsidies, can likely endure price competition for the time being, but companies in the US, Europe, and Japan are unlikely to withstand it.

China Has Secured Market Dominance Through Low-Price Exports... Became the Seed of Trade Disputes

Seasonal Industry. The image is not related to any specific expression in the article.

China has long dominated export markets through low-priced manufactured goods. A representative example is steel and aluminum. In the past, China's steel industry overproduced products beyond what domestic construction companies could handle, and surplus products were sold cheaply in export markets.

The cheap 'steel tsunami' also affected international steel prices. Steel companies in the US, Europe, Japan, and South Korea had to endure cutthroat competition. Meanwhile, Chinese companies aggressively expanded their market share.

This aggressive export strategy became the seed of US-China trade frictions. In 2012, the administration of former US President Barack Obama imposed anti-dumping and countervailing duties on Chinese solar panels, paper, and steel, to which China responded with opposition. The two countries entered a World Trade Organization (WTO) countervailing duty dispute and engaged in fierce battles for about seven years.

The Obama administration did not stop there. In 2017, former President Obama criticized the Chinese financial sector for providing cheap loans to Chinese steel companies and filed a new lawsuit with the WTO.

These bilateral frictions materialized into the Trump administration's 'tariffs on China,' which took over the baton from former President Obama. Tariffs of 25% on Chinese steel and 10% on aluminum were imposed. Subsequently, the two countries entered all-out trade disputes not only over steel products but also over eco-friendly energy equipment, batteries, and semiconductors.

Batteries Are Core Products for Eco-Friendliness... Impact Could Be Greater

Offshore Wind Power Complex in Hubei Province, China
[Image Source=Yonhap News]

It is difficult to predict what impact the tsunami of Chinese secondary batteries will have on global trade in the future. Batteries are manufactured goods of a different nature than steel.

In 2017, China's industrial authorities repeatedly urged their steel industry to 'restrain' overproduction, nominally to prevent 'environmental pollution.'

However, batteries are core products for the global economy's decarbonization. Since both the West and China are focusing on eco-friendly energy and electrification of national infrastructure projects, conflicts over market share in the battery industry could become much fiercer than those over steel.

China desires hegemony in the global battery industry, and other advanced countries are unlikely to tolerate their domestic markets being dominated by China. One foreign media outlet pointed out, "If the (battery) overproduction problem worsens, Chinese companies will turn to exports," adding, "This could escalate tensions between China and the West."

This content was produced with the assistance of AI translation services.