Xi Jinping says China’s exports are helping to ease global inflation

Xi Jinping has hit back at western criticism of Chinese oversupply as Beijing leans on manufacturing to boost its economy, arguing that the country’s exports are helping to ease global inflation and support a clean energy transition.

The Chinese president told visiting German Chancellor Olaf Scholz in Beijing on Tuesday that “both sides should be wary of the rise of protectionism” and “insist on looking at production capacity issues objectively”.

“China’s exports of electric vehicles, lithium batteries, photovoltaic products, etc have not only enriched global supply and alleviated global inflation pressure but also made great contributions to the global response to climate change and green and low-carbon transformation,” Xi said, according to state media.

The comments came as China faces increasing resistance from its trading partners to an influx of cheap exports, with Beijing trying to compensate for a property slowdown by investing in manufacturing.

The EU has launched a wave of anti-subsidy investigations into Chinese goods, including electric vehicles, solar panels, wind turbines, trains and other products.

Last week, US Treasury secretary Janet Yellen delivered a blunt warning to her Chinese counterparts that Washington would not tolerate a “supply shock” of artificially low-cost Chinese imports being dumped on its markets.

Speaking in Beijing, Scholz said he had expressed his “concern” to prime minister Li Qiang that “unilateral economic policy decisions in China are creating big structural difficulties for companies in Germany and Europe”.

He said he had discussed with Li the need for “fair competition . . . equal market access, the protection of intellectual property and the necessity for reliable legal conditions”.

Scholz said Germany didn’t want to decouple from China, but it had an interest in “scaling back lopsided dependences, diversifying supply chains and reducing risk for the economy”.

Li also addressed the issue of oversupply, saying such imbalances were “universal”. “From a global perspective, different countries have higher production capacities in their stronger industries, in other industries they [are] lower,” he said. “It depends on their comparative advantages.”

He said that oversupply “serves competition, as well as the survival of the fittest”.

The prime minister also denied that Chinese renewable companies were stronger than their western counterparts because of state subsidies. “The advantages of this industry in China were achieved because we have real skills, not thanks to government subsidies,” he said.

German companies have a strong presence in China’s markets, particularly groups such as Volkswagen and BASF, complicating Germany’s position on protectionist measures.

But they are increasingly concerned about diminishing market access. Two-thirds of companies surveyed by the German Chamber of Commerce in China said they faced “unfair competition”.

Local Chinese companies were still receiving privileged access to government procurement, and there was uncertainty in areas such as cross-border data transfer, said Maximilian Butek, executive director of the German Chamber of Commerce in East China.

This government support was coming as Chinese companies were becoming globally competitive in areas such as automotives, giving them an added advantage against international rivals, he added.

“Why do you need to protect an industry where the local companies are fully empowered to compete with international markets?” said Butek.

Scholz also addressed the war in Ukraine, saying he had asked Xi to “use his influence on Russia so that [Russian President Vladimir] Putin finally stops this insane campaign, withdraws his troops and ends this terrible war”.

China’s president has forged a close partnership with Putin, with Beijing buying Russian oil and Chinese companies selling billions of dollars of goods ranging from cars to machine tools.

The US has alleged that China is filling an important gap in Russian industry created by western sanctions by selling dual-use products that can serve in arms manufacturing.

Scholz and Xi had agreed to co-ordinate preparations for a high-level conference in Switzerland to discuss a peace framework proposed by Ukraine, Scholz said.

But Xi had earlier expressed only lukewarm support for the Swiss peace conference, which is due to be held in mid-June. In a statement on Xinhua, he said he would only support such a conference if it was “recognised by Russia and Ukraine”. The authorities in Switzerland have said Russia is unlikely to participate in the event.