US Treasury Secretary Janet Yellen warned China on Monday that Washington will not accept new industries being decimated by Chinese imports as she wrapped up four days of meetings to press her case for Beijing to rein in excess industrial capacity, according to Reuters.
Yellen, making a second trip in nine months to further ease strained ties between the world’s two largest economies, has voiced concern about China’s fast-growing exports of electric vehicles, batteries, solar panels and other green-energy goods.
The focus of her trip was industrial policy, and what the US and Europe describe as manufacturing overcapacity in China. Wealthy nations fear a wave of low-priced Chinese exports that will overwhelm factories at home. Yellen cited the manufacturing of electric vehicles and their batteries as well as solar energy equipment — sectors that the US administration is trying to promote domestically — as areas where Chinese government subsidies have driven rapid expansion of production, according to AP News.
She has said China’s state support has ramped up its production capacity far beyond what domestic demand can absorb.
Cheap Chinese exports threaten jobs in the US and elsewhere, she added, drawing parallels with the pain felt in the US steel sector in the past.
“We’ve seen this story before,” Yellen told reporters. “Over a decade ago, massive PRC government support led to below-cost Chinese steel that flooded the global market and decimated industries across the world and in the United States.”
She stated, “I’ve made it clear that President Biden and I will not accept that reality again.”
Yellen added her exchanges with Chinese officials had advanced American interests and that US concerns over excess industrial capacity were shared by allies in Europe, Japan, Mexico, Philippines and other emerging markets.
She said a possible short-term solution was for China to bolster consumer demand and shift its growth model away from supply-side investment.
Yellen spoke about the issue at length with Premier Li Qiang and also met Finance Minister Lan Foan on Sunday. She met People’s Bank of China (PBOC) governor Pan Gongsheng and former vice premier Liu He on Monday.
Treasury officials said the US and China were deepening co-operation on financial stability issues, with two more simulations of financial shocks scheduled after a recent exercise on dealing with the failure of a large bank.
Chinese officials say the criticism understates innovation by their companies in key industries and overstates the importance of state support in driving their growth.
Chinese Commerce Minister Wang Wentao voiced more pointed objections during a roundtable meeting with Chinese EV makers in Paris, saying US and European assertions of Chinese excess EV capacity were groundless.
“China’s electric vehicle companies rely on continuous technological innovation, perfect production and supply chain system and full market competition for rapid development, not relying on subsidies to gain competitive advantage,” Wang said during his trip to discuss a European Union anti-subsidy investigation.
Beijing has acknowledged there’s too much capacity in at least some industries, though it also accuses the US and other countries of trying to shield their own less-competitive companies, Bloomberg reports.
On the war in Ukraine, Yellen warned that any banks that facilitate the sale of military or dual-use goods to Russia could face US sanctions.
“I stressed that companies, including those in the PRC, must not provide material support for Russia’s war and that they will face significant consequences if they do,” she said, according to AP News.
Yellen announced that the new talks will get under way next week with a meeting between two US-China working groups in Washington.