The Biden administration is urging China to change its industrial policy to address concerns about manufacturing overcapacity that threaten U.S. jobs. Treasury Secretary Janet Yellen recently had talks with Chinese officials on this issue, as well as national security concerns related to Chinese companies potentially supporting Russia in the Ukraine war. Yellen emphasized the desire for a healthy economic relationship with China and noted the importance of discussing these issues further in upcoming meetings.
Yellen highlighted specific industries such as the manufacturing of electric vehicles and solar energy equipment where Chinese government subsidies have led to rapid expansion of production. China has also filed a complaint with the World Trade Organization regarding the Inflation Reduction Act signed by President Joe Biden, claiming it distorts fair competition due to electric vehicle subsidies. The U.S. is seeking to address these issues through ongoing discussions and collaboration with Chinese counterparts.
China’s growing industrial capacity has implications for global markets, with Yellen expressing concerns over artificially cheap Chinese products flooding the market and impacting American and foreign firms. The U.S. plans to host Chinese counterparts for discussions on economic and financial issues, as part of efforts to address the challenges posed by China’s industrial policy. The upcoming talks will coincide with the IMF and World Bank Spring Meetings.
Despite the complexities of the U.S.-China relationship and Xi Jinping’s goals of building China into a major power, Yellen emphasized the need for a shift in China’s policies to address overcapacity issues. Calls for better coordination of policies to promote new technologies and achieve balanced growth were made during Yellen’s visit to China. The U.S. is advocating for higher consumer spending in China to reduce the need for large government subsidies in key industries.
Yellen issued warnings regarding banks facilitating the sale of military or dual-use goods to Russia, stating that they could face U.S. sanctions. The U.S. is closely monitoring any support provided to Russia and the consequences for companies involved. Chinese officials responded to Yellen’s concerns, emphasizing the importance of not interfering in China-Russia relations and protecting the legitimate rights and interests of Chinese enterprises. Yellen also met with China’s central bank governor during her visit, indicating ongoing engagement between the two countries on economic issues.
