Boxing match between two Chinese robots.Image: keystone
interview
China promotes overproduction and thus puts pressure on Western industrialized countries. China expert Xie Yanmei explains why they have to defend themselves against this.
June 13, 2026, 2:18 p.mJune 13, 2026, 2:18 p.m
I would like to start with a question that The Economist recently asked. It reads: “China is very innovative. Its economy is in trouble. What will prevail?” What is your answer?
China’s economy is indeed divided. Technologically speaking, it is very innovative, dynamic and effective.
And very competitive.
Oh yes. Therefore, it can further expand its global market share.
But?
The economic situation is currently quite bleak. Growth has slowed significantly and the real estate crisis has still not been digested. Consumer sentiment is also anything but euphoric.
Xie Yanmei has been a Senior Fellow of the Asia Society Switzerland since 2006. She also works as a research associate at the Rand Corporation think tank. She examines China’s political economy as well as its industrial and foreign policy.image: pd
So what will prevail?
I can well imagine that both things can coexist for a longer period of time because they are connected.
In what sense?
The Chinese state has decided to give priority to technological development and devote all reserves to this area. This comes at the expense of consumers and at the expense of companies’ profits.
Does this mean that Chinese companies – like Japanese companies in the 1980s – care more about market share than profits?
It’s less about what companies want and more about what the government wants. It is indeed true that globally successful Chinese companies are able to increase their market share, but at the same time their profit margins are decreasing.
How does this calculation work out from a business perspective?
The government provides cheap loans. That’s why Chinese companies produce massive overcapacity. This in turn leads to price wars.
But it has also led to China becoming the leading manufacturer of electric cars, batteries and solar panels. Why don’t we benefit from this by restructuring our economy ecologically with cheap but technically high-quality products?
That might be possible in Switzerland. But imagine the German medium-sized entrepreneur who explains to his employees: Sorry, I have to fire you because the Chinese products are good and cheap. Or the German politician who has to say with the same words: Sorry, the jobs are just gone. Or the EU representatives who have to explain: We now have a zero-emissions economy, but also no more jobs.
BYD electric cars are ready for export.Image: keystone
To be fair, it must be said that the Chinese argue as follows: We don’t want the whole cake, but only the share that Western companies have in China. What’s wrong with that?
Look what happened to the auto industry in Thailand.
Please.
In the hope of attracting large investments, Thailand has opened its borders to Chinese companies. The result is now that there is massive overcapacity and price wars. Toyota, which had a significant market share in Thailand, was forced to withdraw. The Chinese certainly don’t declare that we want to destroy other countries’ auto industries. But in reality that is exactly what happens.
What are the lessons from Thailand for Europe?
BYD & Co. can easily start a price war with VW & Co. that will last years and reduce profit margins to zero, because they can trust that they will continue to receive money from the Chinese state banks.
Germany will not give up its car industry without a fight either. The state of Lower Saxony is a significant shareholder in VW.
Yes, but the government support cannot be compared to that of China.
“The Chinese are taking a more pragmatic approach. They promote the application of AI.”
The Iran War is a godsend for the Chinese auto industry. Electric cars have received a huge boost.
In this respect, China is actually a winner of the Iran War. It is now paying off that it has reduced its dependence on fossil fuels and that, when it comes to electric cars and solar panels, it has not constantly changed its targets like the EU. There is also no denying that China has done a lot to ensure that products that cause far fewer emissions have become established.
Isn’t it extremely stupid of the USA that they not only want to hinder the ecological restructuring of society, but also partially reverse it?
It actually doesn’t seem very intelligent to me, especially since it’s not just about ecology, but also about technical progress. Electric cars are simply better than combustion engines. In addition, many related technologies are also not funded.
What are you thinking about specifically?
The so-called spillover effects. Better batteries that can also be used in drones or robotics. Solar and wind energy have also led to the emergence of a smart grid in China.
Seen this way, is it a mistake that the USA is de facto preventing the import of Chinese electric cars with high tariffs?
Only to a limited extent. They also want to avoid becoming dependent on Chinese products.
A Chinese robot who works as a car salesman.Image: keystone
China and the USA are engaged in a highly competitive race for artificial intelligence. Who will win – or is that a stupid question?
It’s not a stupid question and everyone asks it. Americans spend enormous amounts of money to be leaders in research. The Chinese are taking a more pragmatic approach. They promote the application of AI. However, we must remember: AI is not an ordinary industrial product. A car, whether a luxury or an everyday car, carries passengers from A to B, although the driving experience may be different. AI is different, the difference is an either/or: higher intelligence can solve problems, complete tasks and make itself more intelligent. Deeper intelligence cannot do this. I can therefore imagine a scenario in which the Americans make fundamental progress and increase the gap to the Chinese.
The Iran war is increasingly becoming a disaster for the Americans. Are the Chinese also the political beneficiaries?
The thesis that China is the power that ensures stability in the world has certainly gained momentum. In contrast to the Trump administration, China has not started a single conflict. How far this plays into China’s hands remains to be seen. The Europeans are certainly disgusted by the US president’s behavior and see the Chinese as more predictable. Nevertheless, they see the imbalance in trade between Europe and China and hesitate because it scares them.
The US still has far more of what is called soft power. That means American culture is much closer to us. Is that the reason?
I am a realist and think soft power is overrated. If soft power were so powerful, then Canada would be the most powerful country in the world. Ultimately, it is still the hard power – military and economic – that is decisive.
“I am a realist and think soft power is overrated.”
Since you mention Canada: Because Trump is causing trouble, the Canadians have opened the borders wide to Chinese imports. How do you assess that?
I think it’s a mistake. How can you allow Chinese cars or Chinese investment without avoiding Chinese overproduction? In addition, there is a risk that domestic supply chains will be destroyed. Chinese automakers will also benefit Chinese suppliers. The low-profit model will prevail across the board and destroy the existing domestic economy.
And let wages fall.
This risk exists. In addition, Canada can only offer raw materials, especially oil, in return for technical Chinese imports. That seems to me to be a recipe for industrial decline.
Switzerland still has a large trade surplus with China. So can we afford to import Chinese cars?
Thanks to its highly developed economy, Switzerland is in a privileged situation. Think, for example, of robotics or medical technology, which are world leaders.
However, the question arises as to how long Switzerland can defend this privileged position.
I fear that the Swiss could end up like the Germans. Ten years ago the Germans felt far superior to the Chinese. They have now overtaken them when it comes to electric cars. Switzerland must therefore make an effort to ensure that it does not suffer the same fate. I also see an indirect danger.
Aiming high: Chinese President Xi Jinping.Image: keystone
What do you mean by that?
Europe is an important trading partner for Switzerland. It is currently suffering the China Shock 2.0. Its economy is falling behind. Switzerland will also feel this.
Does China want to become the world’s sole economic superpower?
In 2024, President Xi Jinping explicitly stated that China wanted to be less economically dependent on the rest of the world, and at the same time the large Chinese market should make other countries more dependent on China.
To return to the initial question: Can China achieve these goals even if it is in such deep economic difficulties?
Absolutely. The UN predicts that China will dominate around 45 percent of global industrial production by 2030. Currently it is around 35 percent.
Are China’s current economic problems just a temporary phenomenon?
I see it differently. An economy can have many weaknesses and still be globally dominant. You can also see this in the USA. Part of the American economy is extremely innovative, but inflation has not been defeated and the wealth gap is widening. This also applies to China. Its economy can be innovative – and in trouble – at the same time.