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Does China’s weak domestic demand really lead to excess capacity?: People's Daily_我的网站

A |     With around 100 days to go before the 33rd APEC Economic Leaders' Meeting, the economic links between Shenzhen in South China's Guangdong province and members of the Asia-Pacific Economic Cooperation are strengthening across multiple dimensions, spanning maritime logistics, business expansion and international consumption.         The APEC meeting will be held in Shenzhen on Nov 18 and 19, marking the third time that China hosts the event.    At Yantian International Container Terminals, stronger connections with Asia-Pacific markets are visible through the expansion of shipping services and trade flows.    "Yantian International operates an international shipping network with 100 weekly services, including 53 services connecting APEC members," said Pang Ning, general manager of carrier and intermodal transportation services in the commercial department of YICT.    "This year, we have launched 11 new international routes connecting APEC economies, including services linking Jakarta and Surabaya in Indonesia and Laem Chabang in Thailand, providing efficient and stable logistics services for Chinese manufacturers expanding into Asia-Pacific and global markets," Pang said.    In the first five months of this year, the value of imports and exports between enterprises on the Chinese mainland and in APEC economies through the Yantian Port reached nearly 400 billion yuan ($59 billion), accounting for about half of the port's total foreign trade value during the period.    The port has also strengthened support for emerging trade models. It currently operates more than 10 cross-border e-commerce express sea routes, providing logistics support for exporters of smart home appliances, 3D printers and portable consumer electronics.    Furthermore, Shenzhen is strengthening support for Chinese companies seeking to tap overseas markets. The Shenzhen International Business e-Station, the city's overseas business service platform, is supporting the "going global" drive of Chinese enterprises by integrating government resources and market services.    The platform has gathered more than 200 professional service providers and covers 70 categories of overseas business services.    "Taking advantage of the APEC meetings, we will further strengthen cooperation with APEC economies, including their governments and business groups," said Liu Yang, manager of Shenzhen International Business e-Station.    Liu said the platform aims to promote investment and business exchanges in both directions, attracting companies from APEC economies to Shenzhen while supporting Shenzhen enterprises in exploring overseas markets.    This year, the platform has organized promotion activities related to economies including Vietnam, Thailand and Malaysia, helping local companies learn about overseas opportunities, he added.    Beyond trade and business expansion, new growth momentum is also seen in international consumption between Shenzhen and other APEC economies.    Opened in August 2025, Shen­zhen's first downtown duty-free shop has developed a retail model combining duty-free shopping, tax refund services and duty-paid retail, aiming to improve services for overseas visitors. Through measures including the "one order, one package, one code" system, the tax refund process for eligible customers has been shortened to just about five minutes.                    。    

    A worker fulfills orders for energy-saving and environmentally friendly boilers destined for export in a manufacturing enterprise in Nantong, East China's Jiangsu Province on August 4, 2026. The enterprise offers products including industrial waste disposal equipment, with sales to more than 30 countries and regions. Photo: CNS PhotoIn recent years, some economies, anxious about their own industrial competitiveness and market position, have politicized economic and trade issues, taking turns to hype false narratives such as "China overcapacity" and a "China Shock 2.0," and using them as pretexts to roll out protectionist measures.
But what are the facts on the ground?
China's Ministry of Commerce recently released a document titled China's Position on the So-Called Excess Capacity Issue. Reviewing the evolution of the global capacity landscape from a historical perspective, it offers an objective analysis of how industrial subsidies, trade surpluses, economic imbalances and market competition relate to "overcapacity," sets out China's policy practices and the direction of its efforts, and puts forward China's ideas and proposals - a forceful response to the "China overcapacity" narrative. 
Plainly, the argument that "China's inadequate domestic demand gives rise to excess capacity" rests on a logical sleight of hand - it takes a localized phenomenon at the micro level of the market and applies it wholesale to the structure of the macroeconomy, a picture far removed from reality.
China is not only a major manufacturing power but also a major consuming power. Domestic demand has long been the main engine of the Chinese economy.
To see through the logical fallacy of the "overcapacity" narrative, one must first be clear about where the Chinese economy actually sits in the global landscape.
In the course of economic globalization, China has actively integrated itself into the international division of industrial labor and become the "world's factory" in the truest sense. Chinese manufacturing has enriched the global supply of goods, lowered living costs for consumers in countries around the world, and played an important part in easing global inflationary pressure. But to define China simply as a "producer" on that basis, and from there to conclude that it suffers from "inadequate domestic demand and overcapacity," is a proposition that does not hold water.
From 2013 to 2024, domestic demand contributed an average of 93 percent to China's economic growth, with consumption and investment accounting for an average of 55 percent and 38 percent respectively. China's total retail sales of consumer goods rose from 23.8 trillion yuan ($3.53 trillion) in 2013 to 50.1 trillion yuan in 2025, doubling in size.
Measured at the World Bank's purchasing power parity rates, China's total retail sales of consumer goods in 2025 were 1.7 times those of the US, making the country the world's largest market for consumer goods in all but name. China today ranks first globally in the physical volume of goods consumed, and its per capita annual consumption of some industrial products already approaches the levels seen in developed economies.
China keeps expanding its domestic demand and is working toward a higher-level balance between supply and demand.
Growth in China's total retail sales of consumer goods has slowed somewhat in recent years, and some have taken this as proof of weak domestic demand. That reading is neither objective nor complete.
A strong domestic market provides strategic support for Chinese modernization. The outline of China's 15th Five-Year Plan (2026-30) period devotes a dedicated part to building such a market, stressing the need to adhere to the strategic focus of expanding domestic demand, to expand effective investment, to further implement special actions to boost consumption, to promote the expansion and upgrading of commodity consumption, to unleashing the potential of service consumption, to strengthening the foundation of residents' consumption and to continuously improve the consumption environment - using new demand to guide new supply, and using new supply to create new demand, so as to promote a virtuous cycle between consumption and investment, and between supply and demand, achieve a higher level of dynamic balance between supply and demand.
The slowdown in retail sales growth is consistent with China's shift from high-speed growth to high-quality development, and it also reflects the upgrading of the country's consumption structure. China's consumer market is moving faster from one dominated by goods toward one in which goods and services carry equal weight. Spending on services is growing rapidly and is expected to account for more than half of the total by 2030.
China's super-sized market is not only the bedrock of its own development but also a broad platform on which countries around the world can share in the dividends of that growth.
China has ranked as the world's second-largest importer for 17 consecutive years and is a major export destination for nearly 80 countries and regions. It has granted zero-tariff treatment to 63 countries and regions, becoming the first major economy in the world to extend full zero-tariff coverage to every African country and every least developed country that has diplomatic relations with it. It is also the only country to host an international import expo, having staged eight editions of the China International Import Expo with cumulative intended deals worth more than $580 billion. Over the 14th Five-Year Plan period (2021-25) period, China's cumulative imports topped 90 trillion yuan. These facts and figures show clearly that China is not just the "world's factory" but, still more, the "world's market."
Looking ahead, China's middle-income group is set to exceed 800 million people within little more than a decade, and per capita GDP is expected to reach the level of a moderately developed country. With vast room for consumption and ample potential and vitality, domestic demand will remain the main engine of China's economic development and will keep injecting strong momentum into world economic growth.
This was compiled and translated by the Global Times English edition based on an article published in the "Chisu Jinsheng" economic commentary column of the People's Daily on August 6, 2026.
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