US Secretary of the Treasury Janet Yellen yesterday warned during a visit to China that Beijing’s subsidies for industry could pose a risk to global economic resilience.
Yellen arrived in Guangzhou on Thursday for several days of talks with Chinese officials on her second visit to the world’s second-largest economy in less than a year.
She expressed concerns about China’s “overcapacity” undercutting companies in the US and elsewhere.
Photo: EPA-EFE
Such overcapacity is seen as a result of huge Chinese subsidies to industries, such as solar, electric vehicles (EV) and batteries, that risk creating a surplus of cheap goods that threatens those sectors elsewhere.
“Direct and indirect government support is currently leading to production capacity that significantly exceeds China’s domestic demand, as well as what the global market can bear,” she told a gathering of the US business community. “Overcapacity can lead to large volumes of exports at depressed prices and it can lead to overconcentration of supply chains, posing a risk to global economic resilience.”
Such fears are not part of an “anti-China policy,” she said during a question-and-answer session after the speech, but are intended to mitigate risks from “inevitable global economic dislocation that will result” from no change in Chinese policies.
Yellen also told the gathering, organized by the US Chamber of Commerce in China, that she would seek to raise with Chinese officials the “challenges” faced by US businesses operating in the country.
That included Beijing “imposing barriers to access for foreign firms and taking coercive actions against American companies,” she said.
“This doesn’t only hurt these American firms. Ending these unfair practices would benefit China by improving the business climate here,” Yellen said.
Yellen then met with Chinese Vice Premier He Lifeng (何立峰), who said he looked forward to “further in-depth discussions on important issues to China, the United States and the global economic and financial arena.”
He also said they would seek to “provide appropriate responses to key concerns in China-US economic relations.”
“It is hoped that both sides will achieve new mutually beneficial and win-win outcomes,” he added.
The two sides then began closed-door talks, which the US has said would see the two dive deep into both countries’ economic situations as well as address more sensitive areas such as national security and Beijing’s alleged support for Russia’s defense industrial base.
Yellen in the morning told the governor of Guangdong that the US was committed to a “healthy economic relationship.”
However, that required “a level playing field for American workers and firms,” she added.
Beijing has dismissed concerns over its state support for industry, last month condemning an EU probe into its subsidies for EVs as “protectionism” and part of a Western effort to politicize international trade.
Washington’s worries about a flood of exports come as US President Joe Biden pushes to boost domestic manufacturing in clean energy, with policymakers warning that China’s excess capacity could harm the growth of those industries.
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