Commentary RESEARCH

Out with the old, in with the new


2024-03-22 12:00

China Daily


In 2023, Chinese car manufacturer BYD surpassed Tesla and took the lead in the global electric vehicle market by selling over 3 million vehicles. This is a significant achievement for the company. Additionally, BYD produces the blade battery, which offers superior performance, greater autonomy and safety. It's worth noting that other Chinese companies such as Great Wall Motor, Chery and Geely are also making rapid progress in the global EV market.

China is also leading in other sectors linked to the energy transition, such as producing photovoltaic panels and rotors for solar energy turbines. Wind turbine company Goldwind Science & Technology Co edged out Danish company Vestas from the top slot last year. Six of the seven most significant solar energy producers, led by Tongwei Solar, are now Chinese.

China's great productivity in generating clean and renewable energy, offering high-quality goods at low prices, is helping other countries develop their own clean energy production. But, fearing the competitiveness of the Chinese companies, the European Union imposed additional fees in 2013, following complaints from European solar panel manufacturers that they were being forced out of business. After finding that the measures made energy generation companies unviable, the EU had to revoke the fees in 2018. The United States is taking a different path, trying to beat the competition by imposing sanctions or additional taxes on Chinese suppliers.

China's global role in the energy transition market can be exemplified by Brazil's production of renewable energy, which primarily uses tools made in China: Brazilian solar energy production multiplied 13-fold between 2017 and 2022, making the country rank the eighth globally, led by China, the US and Japan. Brazil also showed considerable performance in wind energy, making it the sixth-largest producer in the world. In 2024, Goldwind will open its first factory in Bahia, Brazil.

It is very interesting to observe how a developing country such as China is displacing established industrial powers and causing a revolution in the renewable energy sector. With Chinese companies advancing with EVs, large automakers in the US and Europe are finding it difficult to cope with this new competition. A new idea always surpasses the old one. This situation makes us refer to Joseph Schumpeter's concept of "creative destruction", a historical norm.

According to Schumpeter, the economic system is not static. It develops through productivity growth resulting from innovation, whether by creating a new product, new energy sources, a new production process, new capital goods, or the opening of new markets. This process of innovation and creation destroys established industries.

Take the example of the photography industry. Thirty years ago, the global market was dominated by companies such as Kodak, Fujifilm, Agfa and Polaroid. This segment involved the production of cameras, film, developing paper, chemicals, an extensive sales and development network, and even the industry that produced albums to protect and present the photographs. The vast chain was destroyed by five innovations: increased computer capacity, the internet, digital photography, smartphones and social networks. Because of this, hundreds of thousands of jobs and businesses were destroyed worldwide, but the number of photographs posted increased exponentially.

This same process is occurring in several other sectors and will be further accelerated with the development of artificial intelligence. China's unique place in industrial production today is unavoidable, as, in addition to a gigantic production capacity, the country is advancing in the quality and innovation of its products. Currently, the country is pursuing high-quality growth, highlighting that quality must prevail over quantity. And in this sense, attempts to contain China's advance in the world economy are doomed to failure. In this aspect, let us return to Schumpeter's ideas.

Waves of innovation take place when there is a competitive and challenging economic environment, as productive agents need to act in a system marked by competition and uncertainty. The quest for profit and business survival makes entrepreneurs seek measures to increase their productivity through more efficient equipment, innovative processes, new products or by replacing workers with machines. Currently, conditions that force entities to adopt innovative practices are the new wave of technologies, climate change and global warming. Hence, new products related to the green economy and the digital revolution are being created.

China's success should be an example for other developing countries such as Brazil. It is impossible to offer a decent standard of living for the population without developing productive forces and the capacity for innovation. In this sense, quality education and adopting efficient public policies are essential, which the Chinese government has done since the founding of the People's Republic of China.

The author is a professor of international political economy at the Sao Paulo State University. The author contributed this article to China Watch, a think tank powered by China Daily. 











2024-03-28 10:52
People — Foundation of a State