Treasury Secretary Janet Yellen visited China to discuss overcapacity concerns and encourage market-oriented reforms. She emphasized the importance of a healthy economic relationship that benefits both countries, while also highlighting the issue of China’s industrial overcapacity causing global spillovers. Chinese government support for manufacturing has led to a buildup of production capacity that exceeds domestic demand, leading to challenges for Chinese firms relying on overseas markets to make up for losses. Solutions may involve retiring obsolete capacity and supporting innovation in more competitive companies.
Guangdong province, where Yellen began her trip, is a major contributor to China’s economic growth and home to tech hub Shenzhen. Despite China’s slowdown due to crackdowns on debt reliance and monopolistic practices, the country still has strong growth potential. U.S. policymakers need to acknowledge China’s significant role in global economic growth, particularly in Asia, in order to sustain economic and security ties with Asian partners. Yellen’s visit comes at a time of increasing tensions between the U.S. and China, with both governments trying to increase communication and engagement.
President Biden and Chinese President Xi Jinping recently spoke by phone, the first communication since their meeting in November. Vice Commerce Minister Wang Shouwen visited the U.S. for trade discussions, following last year’s visit by Yellen and Commerce Secretary Gina Raimondo. Plans for regular meetings between the two countries were announced, indicating ongoing efforts to improve relations. Secretary of State Antony Blinken is expected to make another trip to China this year, highlighting the importance of continued engagement between the U.S. and China to address economic and security issues.
Yellen’s discussions in China focused on the need for a level playing field for American workers and firms, as well as open communication on areas of disagreement, such as industrial overcapacity. China’s support for capacity expansion and exports while addressing overcapacity challenges will be crucial in maintaining a healthy economic relationship with the U.S. and other countries. As China continues to grow and expand its economic footprint in Asia, U.S. policymakers must recognize and engage with China’s influence to sustain productive relationships in the region.
Overall, Yellen’s trip to China highlighted the importance of addressing economic challenges and fostering cooperation between the U.S. and China. By engaging in open dialogue and working towards solutions to shared concerns, both countries can build a more stable and mutually beneficial economic relationship. Continued communication and engagement between U.S. and Chinese officials will be key to navigating tensions and finding common ground on issues of trade, investment, and economic growth.
