U.S. officials urge China to address ‘industrial overcapacity’

U.S. Treasury Secretary Janet Yellen on Friday called on China to address industrial overcapacity, reform trade practices and build a “healthy economic relationship” with the United States.

“The United States seeks a healthy economic relationship with China that benefits both sides,” Yellen said in a speech in the southern Chinese industrial city of Guangzhou. “But a healthy relationship must provide a level playing field for businesses and workers in both countries. “

Yellen also met with Chinese Vice Premier He Lifeng and other senior central bank officials on Friday. During the meeting, Yellen told Chinese officials that China’s industrial overcapacity, especially in green energy, threatened U.S. production of parts for electric vehicles and solar panels.

China supports manufacturers of solar panels and electric cars with subsidies, building capacity far beyond domestic market demand and exporting products around the world. While this production has significantly lowered the price of these green products – which are crucial to combating climate change – U.S. and European governments are concerned that Chinese products will flood the market and put domestic production at risk.

Yellen said in a meeting with Wang Weizhong, the governor of Guangdong Province, on Friday that the United States and China must communicate on areas of disagreement such as green industrial policy.

“This includes China’s industrial overcapacity problem, which the United States and other countries are concerned could lead to global spillovers,” she said.

China has tried to downplay these concerns, with Foreign Ministry spokesman Wang Wenbin noting earlier this week that China’s green production has a positive effect on global efforts to reduce carbon emissions.

Wang said the U.S. is reluctant to export technology to China, a policy linked to U.S. concerns about overcapacity in industry, disrupting global supply and demand.

“As for who is engaging in non-market manipulation, the facts are there for all to see,” he said. “The United States has not stopped its containment measures on China’s trade and technology. This is not ‘risk removal’ but creating risks.”

In addition to addressing overcapacity, Yellen also expressed concerns about China’s trade practices.

Yellen said China pursues “unfair economic practices, including erecting barriers to entry for foreign companies and taking enforcement actions against U.S. companies.”

She urged Chinese officials to reform these policies.

“I firmly believe that this is not only hurting these American companies,” Yellen said in remarks at an event hosted by the American Chamber of Commerce in Guangzhou. “Ending these unfair practices will benefit China by improving the business environment here.”

This is Yellen’s second visit to China and the first visit by a senior U.S. official since the meeting between U.S. President Joe Biden and Chinese President Xi Jinping in November last year.

Both He Jiankui and Yellen said that, in He Jiankui’s words, the United States and China need to “appropriately respond to each other’s key concerns” to form a more cooperative economic relationship.

Yellen said: “For the two largest economies, they are seeking progress on global challenges such as climate change and the debt distress of emerging markets in developing countries, and are also concerned about overcapacity and economic actions related to national security. Close communication on issues remains critical. ”

She added that U.S. efforts to promote China policy are aimed at reducing global risks.

“This is not an anti-China policy,” she said. “If China does not adjust its policies, the global economy will inevitably fall into chaos, and this is our effort to mitigate the risk.”