Exclusive: Beijing Moves Out Excess Industrial Capacity to BRI Countries

October 20, 2020 Updated: October 20, 2020

Internal government documents obtained by The Epoch Times suggest that one of the main drivers behind China’s Belt and Road Initiative (BRI, also known as “One Belt, One Road”) is to get rid of the country’s excess industrial capacity by moving them out to participating BRI countries.

Under the Banner of International Industrial Capacity Cooperation

The BRI is a far-reaching, strategic significance for the global leadership of the Chinese Communist Party (CCP), according to a report by the Jilin provincial government, titled, “The Blueprint of Jilin’s Participation in the BRI.” In response to this move, Jilin has made an all-out effort to move out its excess industrial capacity.

Epoch Times Photo
Screenshot of an internal document of the Jilin provincial government describing the strategic significance of solving overcapacity. (Provided by The Epoch Times)

The government of Chuzhou city, Anhui Province, carried out a BRI plan as outlined in a document, titled, “Implementation Plan of Participating in the Construction of the Silk Road Economic Belt and the 21st Century Maritime Silk Road.” Local authorities vowed to “fully follow” the guidelines of the CCP’s 18th National Congress and a series of speeches delivered by Chinese leader Xi Jinping on implementing the BRI plan and to stimulate key local enterprises to join overseas cooperative programs.

In the plan, the local government encourages enterprises with excess industrial capacity to make investments in the BRI countries. It assists certain companies such as those in the cement, glass, and material fabrication businesses to set up foreign manufacture bases.

Epoch Times Photo
Table of International Industrial Capacity Cooperation programs, Chuzhou city, Anhui Province. (Provided by The Epoch Times)

China commentator Li Linyi said that Chuzhou’s plan revealed the real intention behind the CCP’s so-called BRI and relevant international cooperative programs is to shift China’s outdated and excess industrial capacity to the BRI countries.

Chinese Automaker FAW

The Jilin provincial government is a staunch supporter of BRI because of overcapacity in its auto industry. First Automobile Works (FAW) Group, headquartered in Jilin’s Changchun city, took part in the International Industrial Capacity Cooperation program in 2016.

China GERMANY-AUTO-FAW-VOLKSWAGEN
Chinese auto workers on the assembly line at the FAW-Volkswagen plant in Chengdu, in China’s southwest Sichuan Province, during the visit of German Chancellor Angela Merkel on July 6, 2014. (Got Chai/AFP via Getty Images)

In 2015, according to state-run media reports, China’s auto industry had a severe surplus capacity, with an 81 percent of passenger vehicle capacity utilization and a mere 52 percent of commercial vehicle capacity utilization. Capacity utilization refers to the manufacturing and production capabilities that are being utilized by a firm.

According to a 2019 auto industry study released by Hong Kong-based Guosen Securities, Chinese auto companies FAW Group, Geely Auto, Chery, and BYD Auto failed to reach 70 percent of capacity utilization in 2018.

In 2018, FAW’s private brands, including Bestune, Hongqi, FAW Jilin, and Tianjin FAW, had a combined, planned capacity of 780,000 vehicles in total, according to Chedongxi, an independent Chinese media outlet focusing on the smart auto industry. In 2017, only 210,000 vehicles were sold, with less than 30 percent of capacity utilization.

Public sources show FAW has secured an assembly plant in Pakistan, which has the capacity to produce 3,000 mini vehicles, and 1,000 medium and heavy trucks. It is also planning a 5,000-passenger vehicle program.

Jilin’s internal document, titled “Jilin Province Equipment Manufacturing and International Capacity Cooperation Project Library” disclosed that the joint venture between Jilin’s First Automobile Works (FAW) and Pakistan has not made any profit due to poor sales in Pakistan.

In order to improve its business, Jilin authorities had to ask the CCP’s central government for assistance, requesting the BRI project “to be included in the list of China-Pakistan capacity cooperation.” At the same time, Jilin hoped that the State-owned Assets Supervision and Administration Commission of the State Council (SASAC) would ask Pakistan “to purchase FAW truck products as the priority for Pakistan’s major engineering projects.”

According to the documents, the Party chief of Jilin Province, Bayanqolu, placed FAW’s overseas projects among his top agenda when he met with Laos and Burmese leaders during his visits to these two southeast Asian countries in 2016 and 2018 respectively.

Alex Wu contributed to this report.