New cars, including models from Chinese EV maker BYD, are seen parked at the Belgian port of Zeebrugge last October. © Reuters
Yoosuk Kim is the President of the Chey Institute for Advanced Studies, a Seoul-based think tank focused on global affairs, economic security and technology-driven innovation.
Mounting concerns have emerged around China's industrial overcapacity. Yet this is not a conventional case of supply exceeding demand. It reflects a structural imbalance of global proportions one that threatens the industrial viability of many nations and calls for a fundamental recalibration of China's growth model.
First, it is important to acknowledge a basic truth: The U.S. manufacturing sector, despite efforts at reshoring and protectionism, remains structurally unable to satisfy its own consumer demand. Tariff policies may offer short-term protection, but they are unlikely to restore the competitiveness of American manufacturing in a sustainable way. Addressing deeper structural issues will require more than trade barriers. Meanwhile, Chinese manufacturing driven not merely by cheap labor but by innovative entrepreneurship, state-backed research and development, and a maturing industrial ecosystem is growing ever more competitive.
This reality exposes the limits of decoupling. The economic entanglement between the U.S. and China runs deeper than policymakers often admit. Attempting to sever it entirely risks inflation or deflation, inefficiency and instability on both sides. Global resilience depends not on separation, but on managed interdependence.
What makes this moment historically unprecedented is not just China's excess capacity, but the sheer scale and sophistication behind it. From electric vehicles and solar panels to steel, textiles and chemicals, China is flooding the global market with high-quality, low-cost goods. This is not simply oversupply it is systemic displacement.
In ordinary cases, overcapacity might trigger market corrections or regional frictions. But China's industrial power is no ordinary phenomenon. Its vast size and production capabilities allow it to reshape global manufacturing dynamics unilaterally. As a result, deindustrialization pressures are mounting across Europe, North America and parts of Asia.
The pushback is intensifying. Countries facing economic erosion are building coalitions to resist it. Industrial policies, subsidy regimes and trade remedies such as anti-dumping investigations are proliferating. What could have been a story of global economic efficiency is instead becoming one of geopolitical tension and fragmentation.
At the same time, it is essential to recognize that China has played and continues to play a vital role in global development. China's commitment to international institutions, its participation in peacekeeping operations, its investments in infrastructure through initiatives like the Belt and Road, and its contributions to global health governance, including its support for the World Health Organization during critical moments, demonstrate a willingness to shoulder international responsibilities.
Moreover, China's leadership in renewable energy accounting for more than 50% of global clean energy investments has been a crucial driver for the world's transition to a greener economy. These positive contributions form the basis for a more constructive engagement with the world.
Yet the risks of unchecked overcapacity are not confined to China's trading partners. They increasingly threaten China itself.
An export-dependent strategy based on unchecked capacity growth is ultimately unsustainable. As global demand plateaus or turns inward, China may face diminishing returns, job losses and domestic discontent. Already, the signs of strain are visible in industries like real estate and traditional manufacturing.
More fundamentally, Beijing must ask itself: Will dominating the global market with ultra-competitive goods win hearts and minds, or generate fear and resistance? A world flooded with "Made in China" products risks becoming increasingly united in efforts to contain China's rise. This is not just an economic question. It is a question of perception, power and legitimacy.
To avoid this outcome, China must exercise capacity discipline not as a concession to others, but as a strategic investment in long-term global stability and its own sustainable prosperity.
This means shifting from pure volume-based exports to quality-driven, localized production through outbound investment. Encouragingly, some leading Chinese companies, such as BYD, are already establishing manufacturing bases abroad in Brazil, Hungary, Thailand signaling an early recognition of the need for adaptation.
Beyond manufacturing, the next chapter of Chinese growth lies in services and soft power: tourism, education, culture, health care and sports. These domains foster collaboration rather than zero-sum competition, creating mutual gains rather than displacement.
China's growing investments in green technologies, artificial intelligence and health care innovation could also serve as a foundation for a new form of global leadership one based not solely on industrial prowess, but on the ability to solve common challenges.
The challenge of Chinese overcapacity is ultimately a reflection of China's extraordinary industrial success. But success that destabilizes the global economy inevitably invites resistance.
The path forward lies not in fueling new rivalries, but in forging a sustainable model of shared prosperity one that matches China's ambitions with a responsibility to uphold the stability of the global system it has helped to transform.
China has the opportunity to lead not just through production, but through stewardship helping build a global economy that is more balanced, inclusive and resilient. That would be a true legacy of leadership, not only for China, but for the world.
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