Trading up: Elevating every individual
Editorial  ·  2024-05-20  ·   Source: NO.21 MAY 23, 2024

Let's start off with some economics 101: Trade can make everyone better off.

In 2023, China was the global leader in the output and sales of new-energy vehicles, mainly electric vehicles (EVs), for the ninth consecutive year, exceeding 9 million units in both categories. Exports rose by 77 percent, reaching 1.203 million units.

Together, exports of China's "new trio," namely, EVs, lithium-ion batteries and photovoltaic products, surpassed 1.06 trillion yuan ($146.8 billion).

China's green exports have boosted the global response to climate change. Chinese producers have, for example, made EVs more popular by offering affordable prices, which in turn has also helped to alleviate inflationary pressures in importing countries.

Given the country's commitment to green development, China has gained a comparative advantage in this field in recent years through open, intense competition.

In 2010, when the EV industry was fledgling, the Chinese Government introduced subsidies to buyers—4,800 yuan ($664) per plug-in hybrid and 12,600 yuan ($1,745) per battery EV. China then started phasing out the subsidies several years later. As of late 2022, the country had ended all government subsidies.

The evolving new-energy technology and its market potential have not only driven the transformation of traditional auto companies, but also fostered the emergence of new players vying for a niche. The entry of U.S. EV titan Tesla into the Chinese market has added fuel to already cutthroat competition. This competitive market environment has resulted in the development of tech-savvy, consumer-centric products.

Despite this mutually beneficial dynamic, some quarters have resorted to protectionist measures such as imposing additional tariffs and subsidizing their own industries, and charged China with "overcapacity." The U.S., for one, recently decided to quadruple tariffs on imported Chinese EVs to 100 percent and double tariffs on Chinese solar cells to 50 percent.

Economics 101 teaches us trade allows people to specialize in what they do best and therefore improves the wellbeing of all. The U.S. has advantages in many fields such as high-end chips and artificial intelligence. These, complementing China's strengths in new energy, will deliver a better life to all consumers.

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