United States Treasury Secretary Janet Yellen, visiting China, said Friday that subsidies paid by Beijing to the industry represented “a risk to global economic resilience”, worrying about “overcapacity » of Chinese production. Janet Yellen arrived in China on Thursday for four days – her second visit in less than a year – with a first stop in Guangzhou (south) before going to Beijing on Saturday.
Speaking to the local U.S. business community, she said China’s heavy subsidies for manufacturing risked causing a surplus of goods and flooding global markets, threatening the viability of U.S. and other countries’ businesses. “Direct and indirect government aid is leading to production capacity that far exceeds China’s domestic demand, as well as what the global market can support,” Yellen said.
“Overcapacity can lead to large export volumes at falling prices” and “overconcentration of supply chains, posing a risk to global economic resilience,” she added. Before this speech, the Secretary of State met in the morning with the governor of Guangdong province, the richest in the country and emblematic of Chinese manufacturing power. The United States wants “a healthy economic relationship” with China, she assured him.
But this requires “a level playing field for American businesses and their employees,” as well as “open and direct communication on areas where we have disagreements,” she stressed. “This includes the subject of “China’s industrial overcapacity: the United States and other countries are worried about its possible global spread,” said the Minister of Finance. In recent weeks, Janet Yellen has warned against the Chinese government’s vast subsidies in the technology sector, whether green energy, electric vehicles or even batteries.
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An excess of production which floods the world market has already happened before in sectors such as steel and aluminum, Janet Yellen recalled last week. Beijing has so far brushed aside these concerns. Last month, Chinese authorities condemned as “protectionism” the investigation launched by the European Union into Chinese subsidies for electric vehicles. American concerns are expressed at a time when President Joe Biden wants to boost United States production in green energies, hoping to make it a campaign argument as he aims for re-election in November.
Particularly sensitive subject for the Biden administration: the fears of the American automobile sector in the face of Chinese ambitions in terms of electric vehicles, a crucial subject in an election year, underlines Paul Triolo, China specialist for the American consulting firm Albright Stonebridge Group. “It is likely that the (Biden) administration will take steps to demonstrate its willingness to act preemptively to avoid future problems related to Chinese overcapacity in electric vehicles,” he predicts. But Beijing should then “react negatively”, warns the expert.
In China, Janet Yellen will meet with Vice Premier He Lifeng, Finance Minister Lan Fo’an, as well as Premier Li Qiang and central bank governor Pan Gongsheng. They will notably have the opportunity to address sensitive issues such as American restrictions against China, taken in the name of national security, as well as Beijing’s economic support for Moscow. Bilateral relations have been strained in recent years due to several issues: Taiwan, rivalry in new technologies, the struggle for influence in the Asia-Pacific and even human rights.
But the two countries seem eager to renew dialogue, particularly since a successful meeting in November between Joe Biden and Chinese President Xi Jinping in California. Janet Yellen’s visit to China in July 2023 helped stabilize the bilateral relationship, in particular thanks to the creation of bilateral working groups on the economy and finance. American Secretary of State Antony Blinken is also expected in China in the coming weeks, a new sign of the resumption of normal trade between the two powers.
