China’s Green Tech Overcapacity: A Modern Echo of 19th-Century Industrialization

The global trade landscape is currently witnessing a significant friction point as international trade bodies and major economies raise alarms over China’s industrial overcapacity. Specifically, the surge in Chinese exports of Electric Vehicles (EVs), lithium-ion batteries, and solar panels—often termed the 'New Three'—has triggered concerns about market distortions. Critics argue that massive state subsidies have allowed Chinese firms to produce far beyond domestic demand, leading to a flood of low-priced goods in international markets that threaten the industrial base of the West and emerging economies alike.

This contemporary surge mirrors the historical patterns of rapid industrialization seen in the 19th and early 20th centuries. During their respective periods of 'catching up,' countries like the United States, Germany, and Japan utilized state-led strategies, protectionist tariffs, and subsidies to nurture their nascent industries. For instance, the 'American System' of the 19th century and Germany’s state-backed industrial expansion under Bismarck were designed to challenge British manufacturing dominance. Today, China’s strategy represents a modern, high-tech iteration of these historical precedents, albeit on a much larger, globalized scale.

The implications for global governance are profound. The situation marks a decisive shift away from the neoliberal 'free trade' consensus toward a renewed era of 'industrial policy.' For India, this presents a dual challenge: the threat of cheap imports undermining the 'Make in India' initiative and the opportunity to position itself as an alternative manufacturing hub through schemes like Production Linked Incentives (PLI). As nations move toward 'de-risking' their supply chains, the tension between achieving global climate goals through cheap green tech and maintaining domestic industrial health remains a central policy dilemma.