US needs a solution to China’s problem

Donald Trump and Kamala Harris are both promising to preside over a manufacturing renaissance and whoever wins will have the wind at their back.

A lot of new factories are already under construction in the United States thanks in part to subsidies provided by the Chips and Science Act, the Inflation Reduction Act and the Bipartisan Infrastructure Law. With continued focus from Washington, the country could see ground broken on still more new factories.

But don’t underestimate the threat China poses to the rejuvenation of American industry. China has a lot of industrial overcapacity and its government is investing in additional overcapacity. That will put pressure on prices of a wide variety of manufactured goods, making it more difficult for new factories outside China to make profits.

China denies it has overcapacity. The Chinese say foreigners who use that word are trying to thwart China’s rise by suggesting there should be limits on how much it can produce and export.

But China already dominates world manufacturing. It produces 35% of the world’s factory output. That’s more than the combined shares of the next nine largest manufacturing countries and nearly six times the 12% share of the number two producer, the US.

Economist Richard Baldwin calls China “the world’s sole manufacturing superpower.”

Foreign economists say China’s obsession with manufacturing has left its economy dangerously unbalanced, heavily overreliant on investment at the expense of consumption. They say this underlies the country’s slowing growth, rising unemployment and real-estate debt problems.

China’s leaders reject that analysis. They’re doubling down on investment in manufacturing and planning to export what the domestic market can’t absorb.