U.S. Treasury Secretary Janet Yellen speaks at the AmCham China Fireside Chat held at the Baiyun International Conference Center in Guangzhou, southern China, on April 5, 2024. (Photo by Pedro Pardo/AFP)
GUANGZHOU, China – U.S. Treasury Secretary Janet Yellen warned on Friday during a visit to China that the Chinese government's industrial subsidies could pose risks to the resilience of the global economy.
Yellen arrived in Guangzhou on Thursday and spent several days meeting with Chinese officials, her second trip to the world's second-largest economy in less than a year.
In a speech Friday, he said China's “overcapacity,” or heavy subsidies to industry, is creating a surplus of goods that risks flooding global markets and hurting businesses in the U.S. and other countries. expressed concern.
“Direct and indirect government support has now led to production capacity that significantly exceeds what China's domestic demand and global markets can sustain,” he told a gathering of the U.S. business community in the city. Ta.
“Overcapacity could lead to large exports at depressed prices,” she said.
Read: Yellen faces tough road on China's overcapacity issue
“And that could lead to supply chain concentration, posing risks to the resilience of the global economy.”
In the morning, Yellen told the governor of Guangdong province, a vast province that symbolizes the reform and development that has driven China's breakneck growth, that the United States is committed to a “sound economic relationship.”
But she stressed that this requires “a level playing field for American workers and businesses” and “open and direct communication on areas of disagreement.”
“This includes the issue of industrial overcapacity in China, which the United States and other countries are concerned about could cause global ramifications,” he said.
China's backlash
China's government dismissed concerns about massive state support for the industry and last month slammed the EU's EV subsidy probe as “protectionism” and part of Western efforts to politicize international trade. did.
Read: China slams EU after formal launch of EV subsidy investigation
U.S. government concerns about heavy exports come as U.S. President Joe Biden pushes to expand domestic manufacturing in clean energy sectors, with policymakers saying China's overcapacity could help these industries. They warn that this could have a negative impact on growth.
Paul Triolo, associate partner for China at Albright Stonebridge Group, said the Biden administration is very sensitive to the U.S. auto industry's concerns about China and EVs, especially in an election year.
“It's likely that the administration will take some action that shows it is willing to act preemptively to prevent future problems with China's overproduction of EVs,” he told AFP.
But he warned that the Chinese government was likely to have a “terrible response” given the impact on U.S. automakers is not yet known.
stabilize the bond
During her visit, Yellen is scheduled to meet with Chinese Premier Li Qiang, Vice Premier He Lifeng, Central Bank Governor Ban Gongsheng, and Finance Minister Lan Fongsheng.
The talks with Mr. He will delve deeper into the economic situation in both countries and address more sensitive areas such as national security and Beijing's alleged support for Russia's defense industrial base.
China and the United States have clashed in recent years over flashpoints ranging from technology and trade to human rights, as well as over the autonomous island of Taiwan and the South China Sea.
Relations have stabilized somewhat since President Biden and President Xi Jinping met in San Francisco in November, with both sides calling it a moderate success.
Yellen's visit in July 2023 helped restart dialogue after a period of heightened tensions, particularly over Taiwan, and led to the launch of the Bilateral Working Group on Economic and Financial Policy.
US Secretary of State Antony Blinken is also expected to visit China again in the coming weeks, a sign that the two countries are returning to more regular engagements.
