US, China to hold talks on industrial ‘overcapacity’

Visiting treasury chief announces plan after meetings with vice-premier

China and the United States will launch talks on industrial “overcapacity”, Treasury Secretary Janet Yellen said yesterday, after a second day of discussions with Vice-Premier He Lifeng in Guangzhou.

Yellen, who is visiting China for the second time in nine months, described her talks with He as extensive and productive.

“We agreed that the US and China will hold intensive exchanges on balanced growth in the domestic and global economies. These exchanges will facilitate a discussion around macroeconomic imbalances, including their connection to overcapacity,” she said in a Treasury Department statement.

“These discussions are critical to protecting American interests and to making further progress toward the healthy economic relationship the vice-premier and I jointly seek.”

Future talks would be led by the US Treasury and Chinese finance ministry, the department added in a separate statement.

The agreement in Guangzhou came a day after Yellen said excessive Chinese exports could undercut American interests and lead to “global spillovers”.

In a brief statement on the talks from state news agency Xinhua, Beijing said it had responded fully “to the production capacity issue” and expressed “serious concerns” about US trade restrictions against China.

Yellen and He had an “in-depth, candid, pragmatic and constructive exchange of views” and agreed to continue discussion on economic and financial issues concerning both countries through the working groups they set up last year, the statement said.

Yellen, who arrived in Guangzhou on Thursday, also met He on Friday for “frank and substantive” talks on the bilateral economic relationship.

Yellen’s five-day visit comes after a phone discussion between President Xi Jinping and his US counterpart Joe Biden on Tuesday. It was the first such talk between the leaders since their November meeting in San Francisco, where they agreed to increase communication and manage tensions through a range of working groups. The discussions aim to help ease strains that have intensified on all fronts.

Washington has expressed increasing alarm in particular about what it calls “overproduction” of Chinese electric vehicles and solar modules, technologies that the country dominates and sees as engines for future growth and exports.

The United States has already taken action to curb imports of Chinese EVs, including launching a national security inquiry. It is also considering raising duties on the vehicles, which are already subject to tariffs of 27.5 per cent, prompting Beijing to complain to the World Trade Organization about “discriminatory” measures.

The US has in turn complained about the lack of a “level playing field” for its businesses in China, saying tightened state regulations and frequent raids on American companies have hampered their development.

Yellen said she raised concerns with He regarding the breadth and scale of China’s “non-market policies and practices” towards American businesses.

But she also said the Treasury Department and China’s central bank would engage in new exchanges to tackle money laundering and financial crime.

“This new effort will enable the US and China to share best practices and provide updates on the actions we are each taking to close loopholes in our respective financial systems,” she said.

The pair also discussed “recent

Vice-Premier He Lifeng and US Treasury Secretary Janet Yellen arrive together for a meeting in Guangzhou yesterday. national security actions”, with Yellen warning of “significant consequences” if Chinese companies provided material support to Russia’s invasion of Ukraine.

After the meeting, she said China assured her it would not do so and did not want this to be a bilateral issue, Reuters reported.

Yellen also said officials she met were more confident about the country’s economy after putting in place policies to address issues relating to the property sector and local government debt.

Yesterday’s talks, which included extended discussions on capacity issues, lasted for 4½ hours, two hours over the scheduled time, delaying a more intimate meeting between Yellen, He, and one other official from each side, according to Reuters.

Yellen was expected to leave in the afternoon for Beijing, where she was to hold a flurry of meetings with other senior officials today, including Premier Li Qiang, Finance Minister Lan Foan, and Beijing Mayor Yin Yong.

She will also meet leading national economists, and students and professors from Peking University.

Tomorrow, she will hold separate meetings with Pan Gongsheng, the governor of the People’s Bank of China, and Liu He, the former vice-premier and economic tsar who retired last year but is believed to still play an influential role in making economic policy.