TMTPOST--Contrary to skepticism often raised by the U.S. and Europe, China’s new energy industry is not primarily built on government subsidies, said Yi Xiaozhun, former Vice Minister of Commerce and former Deputy Director-General of the WTO.

He emphasized that relying solely on subsidies cannot create a healthy industry. Instead, China’s success has been driven by market competition, fast technological iteration, and an expanding market.

Yi made the remarks at the opening of World Trade Organization (WTO) Public Forum on Wednesday, addressing international concerns on the development of China’s new energy sector.

Taking China’s photovoltaic industry as an example, Yi explained that fierce market competition has continuously driven out weaker players. Even once-dominant leaders, such as Wuxi Suntech, went bankrupt due to a lack of competitiveness. In 2023, the conversion efficiency of China’s mass-produced advanced photovoltaic cells reached 25.5%, achieving grid parity.

Similarly, China's electric vehicle (EV) industry has undergone a similar process. In 2018, there were more than 480 new energy vehicle manufacturers in China, but now only about 50 remain. Intense market competition has pushed companies to innovate rapidly, leading to significant cost reductions.

Yi pointed out that in China, it takes just 18 to 24 months for EVs to undergo a new iteration, while in Germany, the process takes four to five years.

Moreover, he highlighted the Chinese government’s efforts on the consumer side, including a series of policies such as tax reductions, cash subsidies for buyers, priority licensing, no license-plate lottery for EVs and no restriction on the license-plate quotas for EVs. These incentives also apply to imported vehicles and those produced by foreign-invested enterprises. Along with robust charging infrastructure, these policies have created huge demand for EVs in China.

The Chinese government has encouraged private capital to pile in charging infrastructure by introducing Public-Private Partnerships and fiscal subsidies since 2014 when there were not many electric vehicles on the road. As of late June 2024, China’s charging poles reached 10.24 million, including 3.12 million private ones and 7.12 million ones built by the government. The growth in total charging poles was remarkable, with a year-on-year increase of 54% in late June.

Currently, the number of EVs in China exceeds 24 million, more than the combined total of the U.S., Germany, France, and Britain. In 2023, global new EV registrations reached 14.8 million, with China accounting for 61%.

According to Wright's Law, for every doubling of production in China's EV industry, production costs fall by more than 20%. This cost advantage is largely due to the economy of scale and the size of the domestic market.

In a candid reflection, Yi shared that over 20 years ago, China implemented protective measures to develop its automotive industry, such as strict import quotas, 200% of tariffs on car,  government subsidies to domestic automakers, and restrictions on foreign investment in auto production. However, these protective measures only caused China’s auto industry to lag behind.

“The rapid development of China’s auto industry today is actually due to China’ entry to the WTO and integration into global value chains. China not only removed import quotas and opened up to foreign investment, but also reduced the average tariff on vehicle imports to 13.8%. Opening up was the real driving force behind China’s automotive catchup,” Yi pointed out.

He expressed concern that some developed countries may be repeating China’s past mistakes by reverting to protectionist policies, such as high tariffs and investment barriers, which could cost them opportunities in the green transformation of the automotive industry.

Achieving net-zero emissions will require trade as a key link, allowing low-carbon products and technologies to spread globally. To achieve this, governments must implement the right policies.

Yi also referenced a warning from the International Chamber of Commerce (ICC), which highlighted the systemic risks posed by unilateral trade measures in key industrial sectors, including EVs. The ICC called on countries to strictly adhere to WTO rules and resolve economic disputes through its mechanisms.

In this context, Yi stressed that a well-functioning WTO dispute resolution system is crucial to ensuring members respect and follow WTO rules when formulating policies.