YELLEN CALLS FOR POLICY CHANGE ON ‘OVERCAPACITY’
US Treasury secretary winds down trip pressing Beijing to tackle industrial issues, while also flagging potential opportunities for cooperation
Against the backdrop of intensifying divisions over China’s overcapacity in green technology exports and “difficult conversations” on national security, US Secretary of the Treasury Janet Yellen wound down her China trip by flagging potential opportunities for cooperation during coming economic and financial working groups.
Before her planned departure today, Yellen also highlighted an area in which the two economies were able to find common ground, via a new anti-moneylaundering working platform that the US Treasury established with the People’s Bank of China (PBOC) during the trip.
But much of the attention during Yellen’s visit was on her insistence that China address its industrial overcapacity issues, particularly in regard to newenergy vehicles and solar modules, which she warned could be a repeat of what happened when China’s below-cost steel flooded into the global market a decade ago.
“I’ve made clear that President [Joe] Biden and I will not accept that reality again,” she said during a news conference at the US ambassador’s residence yesterday afternoon in Beijing. However, she also made a point of reiterating Washington’s position that it was not looking to “decouple” from China.
“Some changes in policies on the Chinese side are necessary and appropriate,” she said, adding that America’s allies shared similar concerns that the situation could lead to “global spillovers”.
But despite Beijing’s past warnings about the risks of overcapacity in some sectors and the potential drag it could have on the nation’s economic recovery, as the leadership highlighted during a key economic conference in December, high-ranking officials pushed back against Yellen’s allegations.
While Yellen was in China sharing the West’s concerns, Minister of Commerce Wang Wentao was in Paris, telling Chinese manufacturers of electric vehicles and lithium batteries that “accusations from the US and EU about China’s overcapacity are groundless”.
And Premier Li Qiang urged Washington to not politicise economic issues and to “look at the capacity issue objectively”, after his meeting with Yellen on Sunday, according to party mouthpiece Xinhua.
Wang added that Chinese companies were competitive due to their innovation and strong supply-chain networks, not because of government subsidies. Last year, the European Union launched an anti-subsidy probe into China’s electric vehicles.
Yellen said the overcapacity issue would continue to be discussed “as early as next week”, when the new rounds of economic and financial working groups commence.
The mechanisms were established last July during her previous trip to China, and three rounds of meetings have taken place.
Meanwhile, Yellen said she had asked her team to kick off meetings under the new “Joint Treasury-PBOC Cooperation and Exchange on Anti-Money-Laundering” platform “very soon”.
Yellen’s remarks came during the first high-level visit by a US official to China this year, and they underpinned Washington’s narrative of finding cooperation despite the competition that persists in areas ranging from trade to science and technological developments.
Yellen said she had spent two hours with Vice-Premier He
Some changes in policies on the Chinese side are necessary and appropriate
JANET YELLEN, U.S. TREASURY SECRETARY
Lifeng explaining America’s concerns on the overcapacity issue, and she said it was “critical” for China to understand that it would have “adverse impacts” on American workers and firms. However, she did not offer specific details on what measures might be taken if China was eventually deemed to have not addressed the problem.
Apart from their divisions on overcapacity, Yellen also noted that she had “difficult conversations about national security” with her Chinese counterparts, and she called for “transparency” from Beijing on its national security actions and “greater clarity on where it sees the line between national security and economic issues”.
She added that these types of concessions would provide “greater stability” to the relationship while also helping bolster confidence for firms investing in China.
Yellen, who landed in China on Thursday, described her packed series of high-level meetings on the mainland as “productive, direct and extensive”. She first met Vice-Premier He and American business executives in Guangzhou, Guangdong province, on Friday and Saturday before arriving in the capital city on Saturday afternoon.
In Beijing, she met Premier Li, PBOC governor Pan Gongsheng, Minister of Finance Lan Foan and Beijing mayor Yin Yong.
She also visited the National School of Development at Peking University, where she had discussions with teachers and students on Sunday.
Her visit also came after a call between presidents Xi Jinping and Joe Biden last week, when Xi warned that the “endless stream of measures” imposed on China created “risks”.
Lu Xiang, a senior researcher with the Chinese Academy of Social Sciences, said Yellen’s concerns about China’s green tech industries suggested that further economic coercion could occur in related areas.
“[The visit] means that there is hope for stabilising bilateral relations, but no one would be naive enough to believe that China-US ties will be closer,” Lu said.