U.S. Treasury Secretary Janet Yellen on Friday called on China to address manufacturing overcapacity, which she said could cause global economic disruption, and create a level playing field for U.S. companies and workers.
After a five-day visit to one of China’s most important industrial and export centers, she raised what the US considers unfair Chinese trade practices in talks with senior Chinese officials.
“The United States is committed to a healthy, mutually beneficial economic relationship with China,” she said ahead of a meeting with Chinese Vice Premier He Lifeng, the central bank governor and other officials in the southern city of Guangzhou. “But a healthy relationship must provide a level playing field for companies and workers in both countries.”
Earlier, she said at an event hosted by the American Chamber of Commerce in China that “Chinese practices… are tilting the playing field away from American workers and companies.”
China’s He did not go into details in his remarks to the media, but said both sides should “respond well to the other side’s main concerns.”
High on Yellen’s list is the problem of overcapacity. Chinese government subsidies and other policy support have pushed solar panel and electric car makers in China to invest in factories, building far more production capacity than the domestic market can absorb.
The massive scale of production has driven down costs and fueled price wars for green technologies, a boon for consumers and efforts to reduce global dependence on fossil fuels. But Western governments fear this capacity will flood their markets with low-priced exports, threatening American and European jobs.
Yellen, the first Cabinet member to visit China since President Joe Biden and Chinese leader Xi Jinping met last November, said it is important for the US and China to have open and direct communication on areas of disagreement.
“This also includes the issue of industrial overcapacity in China, which the United States and other countries fear could cause global spillovers,” she said during a meeting with the governor of Guangdong province.
Guangzhou is the capital of Guangdong, a Chinese manufacturing hub that is home to telecom giant Huawei and BYD, China’s largest EV maker. Hard hit by US restrictions on semiconductor exports to China, Huawei has been at the forefront of Chinese efforts to become self-sufficient and a technology leader.
As during her previous trip to China last July, Yellen received attention on social media after her arrival Thursday evening because she had eaten at a popular restaurant.
A Chinese state media social media account posted a compelling video of her dining with the US ambassador and other officials at Tao Tao Ju, a Guangzhou restaurant dating back to 1880.
The post, one of the most viewed on the Weibo microblogging app the next morning, praised Yellen for holding the chopsticks well, but added: “As a US official, Yellen needs to know more about China than just food. Only by knowing more about China can we correct America’s view of the world, of China, of China-US relations.”
Yellen, who is traveling to Beijing from Guangzhou, met with representatives of the American, European and Japanese business communities before her talks with He.
“I’ve heard from many American business people that operating in China can be challenging,” she said at the American Chamber event in a marbled convention center.
Yellen cites a recent House survey showing that a third of American companies in China say they have suffered unfair treatment compared to local competitors. The US has seen China “pursuing unfair economic practices, including imposing entry barriers for foreign companies and taking coercive measures against US companies.”
“I am confident that this will not only harm these American companies: ending these unfair practices would benefit China by improving the business environment here,” she said in her speech.
China has pushed back against overcapacity concerns raised by both the US and Europe.
Foreign Ministry spokesman Wang Wenbin said earlier this week that the growth of China’s electric and solar energy exports is conducive to global green development and is the result of the international division of labor and market demand.
He accused the US of hindering free trade by restricting technology exports to China.
“As for who engages in non-market manipulation, it is a fact for all to see,” he said. “The US has not stopped taking measures to curb Chinese trade and technology. This is not ‘reducing risk’, but creating risk.”
Yellen said at the American Chamber event that concerns about overcapacity are shared by many other countries, both developing and wealthy.
“This is not an anti-China policy,” she said. “It is an effort by us to limit the risks of the inevitable global economic disruption that will occur if China does not adjust its policies.”
Scott Paul, chairman of the Alliance for American Manufacturing – an alliance of companies and the US steelworkers union – said expectations for the Chinese government’s response are low.
“One thing I hope Yellen can and should say is that the US is prepared to use all the tools at our disposal through policy to ensure that China’s industrial overcapacity does not negatively harm our economic and national security interests,” he told The Associated. Read this ahead of Yellen’s trip.
The Alliance released a report in February saying the introduction of cheap Chinese cars into the U.S. market “could ultimately become an extinction-level event for the U.S. auto sector.” According to the report, the sector accounts for 3% of the US economy.
Yellen told reporters during a refueling stop in Alaska en route to China that the US “will not rule out” tariffs in response to China’s heavily subsidized production of green energy products.
