Special Ep. - China's industrial catalog and the global trade ripple effect

In this special edition of the Hinrich Foundation’s podcast on global trade, the Association of Foreign Press Correspondents-USA sits down with Mariko Watanabe, Professor with the Faculty of Economics at Gakushuin University, to examine how China’s pursuit of industrial scale has driven manufacturing dominance while fueling systemic overcapacity and mounting tensions in the global trading system. 

China’s manufacturing dominance — now accounting for more than 30% of global output — reflects four decades of industrial strategy, state planning, and coordinated investment that have built one of the world’s most integrated production ecosystems. Yet the same system, anchored in the government’s Catalogue of Industrial Guidance, has also encouraged waves of investment into favored sectors regardless of market demand. This has fueled persistent overcapacity in industries ranging from steel and solar panels to electric vehicles and batteries, contributing to falling prices, global trade frictions, and what some economists describe as “immiserizing growth,” where expanding output depresses prices to the point that export earnings remain modest. As geopolitical rivalry with the United States intensifies, China increasingly treats industrial scale as a strategic asset, reinforcing a cycle of capacity expansion that risks deepening supply-chain fragmentation and destabilizing global markets.  

Watanabe argues that addressing these pressures will require both domestic rebalancing toward consumption in China and stronger international cooperation — including more effective trade rules, safeguards, and coordinated action among middle powers — to prevent the gains from industrial scale from concentrating in a single economy. 

 Tune in to this podcast as Mariko Watanabe, Professor with the Faculty of Economics at Gakushuin University, joins the Association of Foreign Press Correspondents-USA to assess how China’s catalog-based industrial policy has driven remarkable manufacturing growth while generating structural distortions at home and growing frictions abroad. The podcast follows up on Watanabe’s recent article for the Hinrich Foundation, “China’s industrial policy a recipe for overcapacity.” 

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Here is an excerpt from their conversation: 

Roseanne Gerin: Chinese exports — like steel, solar panels, and EVs — are now flooding markets not only in advanced economies but also in Vietnam, Indonesia, Mexico, and Türkiye. How are emerging markets experiencing these spillovers differently? 

Mariko Watanabe: For example, in Vietnam, they are now becoming a kind of emerging manufacturing country, and they’ve laid their economic level by exporting to the world. They also established their own steel industries for their own economic welfare. But flooding exports from China have very seriously damaged their domestic steel industry, so they feel they're very dangerous. Vietnam is also already fighting for the WTO to protect them. So, the smaller the country is, the bigger the damage. But the smaller ones do not have enough voice to directly to say something against bigger economies like the United States or China. In that case, particularly for emerging countries, a rules-based solution is highly desirable. Some middle powers like Japan, the EU, Canada, or Australia, should represent these voices of advancing economies. 

Roseanne Gerin: How is the geopolitical trap that you referred to leading to the fragmentation of global supply chains? 

Mariko Watanabe: From the perspectives of China or the United States, which are very huge, it’s ok for them to protect themselves. But I think it, as I said, could become some kind of “chicken game” — which is bigger. China has just pursued building up its own capacity, but they are now suffering from overproduction capacity. If the two bigger economies competed with each other like that, then I think countries all over the world would suffer from some kind of overproduction situation, and so we would not have better economic welfare. We need to elaborate or share the profit from the scale. If one country or a bigger country monopolizes the profit from the scale, it would become very disastrous for both parties and the third parties. The rules-based system and WTO itself were originally designed to pass these facilities. We had better go back to how to improve them or how to remedy what the current system still has. 

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