U.S. Treasury Secretary Janet Yellen has accused China of using subsidies to give manufacturers in key new industries a competitive advantage, distorting the global economy, and said she plans to press China on the issue during an upcoming visit to China. “No other country in the world subsidizes priority industries as heavily as China,” Yellen said in an interview with MSNBC on Wednesday, highlighting “enormous” support for electric vehicle, battery and solar makers. “China is seeking global dominance in these industries.”
The Treasury secretary, speaking in Norcross, Georgia, made the case for reopening U.S. solar cell manufacturing facilities that were closed in 2017 under pressure from “cheap imports flooding the market.”
Speaking to reporters after the event, Yellen declined to say whether the Biden administration would be prepared to threaten Beijing with retaliatory trade measures if China does not cut its subsidies.
“It’s important that the Chinese side understands our concerns,” she said, “but we don’t want to get to the point of retaliation. We want to see if we can take constructive action.”
Yellen, in a prepared speech for the trip, said China’s industrial policies have a track record of causing “massive overinvestment.” She noted that support for industries such as steel and aluminum has bolstered Chinese production and jobs but “forced industries in other parts of the world to shrink.”
“We have raised excess capacity in previous discussions with China and will continue to make it a key topic during my next visit,” Yellen said in remarks. Yellen is expected to travel to China soon for her second visit since the two countries resumed high-level diplomacy.
Yellen also made it clear that the United States is not alone in complaining about excess industrial capacity in China, saying, “Of course, we are seeing the same concerns in Europe.”
The European Commission launched an investigation in October into whether Chinese government subsidies give Chinese manufacturers an unfair advantage. This month, the commission moved to impose tariffs, citing new evidence that China is illegally financing the industry. Brazil has also launched multiple anti-dumping investigations.
Xi Jinping’s Strategy
“We’re now seeing excess capacity building in ‘new’ industries like solar, electric vehicles and lithium-ion batteries,” Yellen said. China’s industrial surplus is “hurting not just American businesses and workers, but businesses and workers around the world.” Facing a major drag on growth from the crisis in China’s real estate sector, President Xi Jinping and his advisers have prioritized the manufacturing sector. The “three new” growth engines of electric vehicles, batteries and renewable energy have received particular attention, along with high-tech semiconductor production.
During her visit to Georgia, Yellen highlighted the Biden administration’s policy of supporting the development of America’s own renewable energy industry. The solar cell manufacturing plant of Suniva, which she plans to visit, is scheduled to restart this spring. Suniva’s recovery is largely due to incentives from the Inflation Control Act and measures for “domestic clean energy manufacturing,” Yellen said.
“China flooded the market with solar panels, driving down prices to levels where virtually no American company could compete. This company went out of business,” Yellen said on MSNBC. “We’re going to make sure that never happens again.”
The Federation of American Manufacturing, a group that represents manufacturers and workers, praised Yellen’s comments as “a step in the right direction.” Scott Paul, the trade group’s president, said in a statement that “Beijing’s policies and past administrations’ reluctance to adequately prevent and respond to threats have left us weakened.”
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