IRIA News

The United States Treasury Secretary Janet Yellen started her five-day visit to China on April 5, 2024, from Guangzhou, China’s major industrial and export hub. The visit is aimed at stabilizing the relationship between the world’s largest economies.

In her second trip to China for high-level talks, Yellen aims to address China’s manufacturing overcapacity which, she believes, is causing global economic dislocation.

The 77-year-old Janet Yellen, a distinguished economist, and former Federal Reserve chair, outlined the topics she plans to discuss with Chinese officials to reporters. Starting her journey in Guangzhou, she will subsequently travel to Beijing for discussions with financial authorities and government officials.

Her agenda includes meetings with Vice Premier He Lifeng, Chinese Central Bank Governor Pan Gongsheng, Guangdong Governor Wang Weizhong, former Vice Premier Liu He, representatives of U.S. businesses operating in China, university students, and community leaders. She is also expected to meet Chinese Premier Li Qiang and senior Chinese officials leading different economic and financial sectors.

“The United States seeks a healthy economic relationship with China that benefits both sides,” Yellen said ahead of a meeting with Chinese Vice Premier He Lifeng and the central bank governor along with other officials. “But a healthy relationship must provide a level playing field for firms and workers in both countries.”

U.S. Treasury Secretary Janet Yellen commenced her five-day visit to China in Guangzhou – a city of profound historical significance in Chinese trade that played a pivotal role in industrial development that drove China’s tremendous growth. This city is central to U.S.-China trade, tracing back to 1784 when the first American ship docked at its port, marking the beginning of a longstanding economic relationship.

“It is crucial that the two largest economies in the world seek progress on global challenges and closely communicate on areas of concern,” Yellen said in a post on social media platform X.

‘Level playing field’ and green energy exports

Yellen had been criticizing China for saturating global markets with heavily subsidized green energy products, potentially undermining the subsidies provided by the U.S. to its renewable energy and electric vehicle sector through the funds allocated by the Democrats’ Inflation Reduction Act. She reiterated these concerns to Chinese officials, emphasizing that the influx of inexpensive solar panels and electric vehicles from China hinders the efforts of other countries to develop these sectors.

Tensions between China and the U.S. are escalating as Beijing is using its governmental resources to exponentially increase the production of electric vehicles and solar panels, as it competes with a surge in U.S. support for these technological sectors.

The disputes between the world’s two largest economies extend to differences in trade, ownership of TikTok, access to computer chips, and national security apprehensions, all of which jeopardize the meticulously developed relationship between them.

Beijing’s extensive scale of production has substantially reduced costs and sparked price competition in the realm of green technologies, benefiting consumers and bolstering endeavors to diminish global reliance on fossil fuels. However, Western governments are concerned that this capacity could inundate their markets with inexpensive exports, posing a threat to jobs in America and Europe.

During an event organized by the American Chamber of Commerce in China, Yellen asserted that “Chinese practices are shifting the balance away from American workers and companies.” China’s representative, however, did not delve into specific details of Yellen’s arguments but emphasized the necessity for both sides to “adequately address the main concerns of the other party.”

Overcapacity challenges

Yellen’s message and talks focused on overcapacity. “Overcapacity isn’t a new problem, but it has intensified, and we’re seeing emerging risks in new sectors,” Yellen said on April 5.

She emphasized that the United States was not adopting an “anti-China” policy and suggested that China could benefit by halting subsidies to firms.

“Overcapacity also poses challenges for Chinese firms and industries and can impact China’s productivity and growth. I believe addressing overcapacity—and more generally considering market-based reforms—is in China’s interest.”

Discussing the U.S.-China economic relationship, Yellen laid out the U.S. Administration’s approach to China and its three key objectives:

• The United States will pursue a healthy economic relationship with China.
• The U.S. will seek to cooperate with China on global challenges.
• The U.S. will deploy its economic tools when needed and in a targeted manner to protect its national security and that of its allies.

China’s pushback

Beijing has categorically dismissed the accusation surrounding its extensive state support for its industries. Last month, China condemned an investigation initiated by the European Union into its subsidies for electric vehicles, labeling it as “protectionism.” Beijing perceives such inquiries as integral to a broader Western strategy aimed at politicizing international trade.

Since President Biden and his Chinese counterpart, Xi Jinping, convened in San Francisco for talks in November, both parties have noted a relative stabilization in relations, labeling the discussions a moderate success.

Janet Yellen’s visit in July 2023 played a significant role in reigniting dialogue following a period of heightened tensions, particularly regarding Taiwan, and resulted in the establishment of bilateral working groups focused on economic and financial policies. The forthcoming China trip anticipated from U.S. Secretary of State Antony Blinken in the coming weeks signals a return to more regular engagements between the two nations.