U.S. Treasury Secretary says bilateral relationship with China is “fundamentally stable”

U.S. Treasury Secretary Janet Yellen told Chinese Prime Minister Li Qiang on Sunday that the ability to have difficult conversations has allowed the two economic superpowers to “stand on a firmer footing” over the past year.

As their meeting began in Beijing, Li Keqiang responded that the two countries needed to respect each other and should be partners, not adversaries, adding that Yellen had made “constructive progress” during her trip.

Yellen said Washington and Beijing had a “responsibility” to manage the complex relationship responsibly, and she made a pitch to China’s leadership to rein in excess factory capacity in the country.

“While we still have more work to do, I believe our bilateral relationship has been put on a more stable footing over the past year,” Yellen said.

“That doesn’t mean ignoring our differences or avoiding difficult conversations. It means understanding that we can only make progress if we communicate with each other directly and openly.”

Yellen made the threat to U.S. and other producers from China’s overproduction of electric vehicles, solar panels and other clean energy products a focus of her second trip to China in nine months.

She visited Beijing in July 2023 to try to normalize bilateral economic relations. It comes after tensions rose over disagreements over Taiwan, the origins of Covid-19 and trade disputes.

U.S. President Joe Biden and Chinese President Xi Jinping held a nearly two-hour phone call on Tuesday to seek to resolve tensions in the South China Sea, a further sign of stabilizing relations between the two countries and their first direct talks since a November summit.

U.S. and Chinese military officials held a rare series of meetings in Hawaii last week that focused on operational security and professionalism.

balanced growth

On Saturday in the southern export hub of Guangzhou, Yellen and her main economic rival, Vice Prime Minister Ho Lifeng, agreed to launch a dialogue focused on “balanced growth.”

Yellen said she intends to use the forum to advocate for a level playing field with China to protect American workers and businesses.

“As the world’s two largest economies, we have a responsibility to our country and the world to responsibly manage our complex relationship and to cooperate and provide leadership in addressing pressing global challenges,” Yellen told Li Keqiang. “

The Economist Intelligence Unit predicts that as the electric vehicle industry continues to grow, China’s battery manufacturing capacity will exceed demand by four times by 2027.

Beijing’s support for electric vehicles has helped local champions such as BYD and Geely share the world’s largest auto market and made China the world’s largest auto exporter.

But rapid growth also means China has generated excess manufacturing capacity and could produce 5 to 10 million electric vehicles a year, according to consultancy Automobility.

Still, far from curbing investment in manufacturing, China has ramped up Xi Jinping’s new mantra of unleashing “new productivity” by investing in cutting-edge technologies such as electric vehicles, commercial aerospace and life sciences – areas in which many U.S. companies have an advantage .

During Yellen’s visit, Chinese state media have been pushing back against Yellen’s comments about overcapacity.

The official Xinhua News Agency said on Saturday that trumpeting “Chinese overcapacity” in clean energy created a pretext for protectionist policies to protect U.S. companies.

Xinhua News Agency stated that suppressing China’s electric vehicle-related industries will not help the United States’ own development, and hopes that more progress can be made during Yellen’s visit to China and that barriers to mutually beneficial cooperation can be broken.