US Treasury Secretary Janet Yellen, currently on a five-day visit to China, has emphasised the need for China to address its industrial overcapacity and reform its trade practices to foster a healthy economic relationship with the United States.
During her visit, Yellen has highlighted concerns regarding state subsidies fueling manufacturing overcapacity in industries such as electric vehicles, solar panels, and semiconductors.
Yellen's remarks in Guangzhou underscored the importance of creating a level playing field for firms and workers in both countries. She held discussions with Chinese Vice Premier He Lifeng and other central bank officials, expressing apprehension about China's industrial overcapacity, particularly in green energy sectors, which poses a threat to American production interests.
China's robust backing of its solar panel and electric vehicle industries through subsidies has led to an exponential increase in production capacity, outstripping domestic demand and causing concerns about global market saturation. Yellen urged for dialogue on areas of disagreement, emphasising the need to address China's industrial overcapacity, which has implications for global trade dynamics.
Despite China's efforts to downplay concerns over its trade practices, Yellen raised the issue of unfair economic practices and barriers to access for foreign firms during her interactions. She stressed the importance of reforming these policies to create a more conducive business environment that benefits both countries.
Yellen's visit marks the first by a senior US official since President Joe Biden's meetings with Chinese President Xi Jinping in November. It comes amid heightened tensions between the two countries over trade and economic issues.
The US has expressed concerns that China's overcapacity will lead to further price reductions and job losses, particularly if excess production is dumped onto global markets. President Biden's recent telephonic conversation with President Xi highlighted the need to address China's "unfair" trade policies, signalling continued US pressure on economic fronts.
Economists warn that China's government-stimulated investment has led to overcapacity in capital-intensive industries, with utilisation rates falling below sustainable levels. The Rhodium Group's recent report highlighted a decline in the utilisation rate of China's silicon wafer capacity and a surge in exports of electric vehicles, solar cells, and lithium batteries.
As Yellen continues her discussions in China, the focus remains on finding common ground to address economic imbalances and promote fair trade practices. The outcome of her visit will likely have significant implications for US-China relations and global economic stability.
Follow us
