Yellen says US plans to ‘underline’ need for China to change policy

BEIJING – U.S. Treasury Secretary Janet Yellen said Monday that future discussions between the U.S. and China will focus on Beijing’s need to change its policies on industry and the economy.

“We intend to emphasize the need for policy change during these conversations – building on the more than two hours I spent with the Deputy Prime Minister on this topic last week,” she said in prepared remarks for a news conference on Monday. she concluded the fourth and final full day of her trip to China.

She arrived in Guangzhou on Thursday and will leave Beijing on Tuesday.

Yellen said her conversations with Chinese officials during the trip discussed plans Beijing had for its economy, but she did not elaborate. Yellen also declined to share what tools the U.S. could use to prevent Chinese industrial policies from resulting in the loss of American jobs.

She noted that U.S. talks with the Chinese would continue later this month at the spring meetings of the International Monetary Fund and the World Bank Group in Washington, DC.

China’s industrial overcapacity – or the overproduction of goods that undercuts global competitors on price – has increasingly become a matter of international concern. Other countries claim that such production is often heavily subsidized.

China’s commerce minister said during a trip to Europe that accusations of “overcapacity” are “groundless” and that innovation, not subsidies, was driving China’s EV industry.

Unlike other countries’ focus on the impact of China’s overcapacity on global trade, Beijing’s concerns about oversupply focus on its deflationary aspects, damage to the health of the banking sector and fiscal stress on local governments, he said. Yue Su, chief economist for China at The New York Times. Economist Intelligence Unit.

“We expect further anti-subsidy and anti-dumping investigations into Chinese manufacturing to continue for the rest of the year, especially as inflation becomes less of a concern for many developed economies,” Su said. “These investigations may extend to Chinese overseas factories, including those in ASEAN countries.”

When asked about possible solutions, Yellen pointed to how China could boost domestic demand relative to supply by adding support for pensions or children’s education.

The high cost of living, including housing and health care, has pushed many Chinese to save rather than spend.

Yellen acknowledged that efforts to reduce industrial overcapacity or increase domestic demand would not be resolved quickly.

“This is an issue we have been discussing in China for more than a decade,” she told reporters.

Consumer demand in China did not recover from the pandemic as quickly as many analysts expected. Unlike the US and Hong Kong governments, Beijing has not issued stimulus checks, focusing instead on cutting corporate taxes and duties.

China has also sought to strengthen its technological capabilities despite increasing U.S. restrictions on how Chinese companies can access that technology.

Both Washington and Beijing have increasingly cited national security as a reason for new measures.

Yellen said Monday that the two sides are exchanging information on the use of economic tools in national security and should continue to do so. “We are determined not to expect any surprises,” she said.

During her trip, Yellen met with top Chinese officials, including Premier Li Qiang in Beijing and Vice Premier He Lifeng in Guangzhou.

“Over the past year, we have put our bilateral relationship on a more stable footing,” Yellen said comments prepared before her meeting with Li on Sunday.

“This doesn’t mean we should ignore our differences or avoid difficult conversations,” she said. “It meant understanding that we can only make progress if we communicate directly and openly with each other.”

In a lecture from China, Li said Beijing hoped the US would adhere to market economy norms and not politicize trade issues. He said the development of China’s new energy industry will make an important contribution to global carbon neutrality efforts.

The US and China agreed to “organize intensive exchanges on balanced growth in the domestic and global economies,” according to a Treasury Department readout after Yellen’s meetings with Vice Prime Minister He.

The two countries also agreed to “launch a joint cooperation and exchange of the Ministry of Finance and the PBOC in the field of anti-money laundering to expand cooperation against illicit financing and financial crime,” according to the reading.

The Chinese side made no explicit mention of such agreements but said both sides planned to maintain communications. Beijing has also “expressed serious concerns” about US trade restrictions.

The Chinese lecture described the talks as “constructive” and mentioned discussions on “balanced economic growth,” “financial stability” and “anti-money laundering.” This is evident from a translation from CNBC.

The US Treasury Secretary also met with Treasury Secretary Lan Fo’an, the mayors of Beijing and Guangzhou, representatives of US companies, and professors and students at Beijing University during the visit.