US Treasury secretary in China amid ‘overcapacity’ dispute

Janet Yellen says subsidies for Chinese industries are leading to a ‘flood’ of cheap goods.
By Alex Willemyns for RFA
2024.04.04
Washington
US Treasury secretary in China amid ‘overcapacity’ dispute China's Vice Minister of Finance Liao Min (2nd R) and US Ambassador to China Nicholas Burns (R) receive US Treasury Secretary Janet Yellen (R) upon her arrival at the Baiyun International Airport in southern China's city of Guangzhou on April 4, 2024.
Pedro Pardo/AFP

U.S. Treasury Secretary Janet Yellen arrived in the Chinese city of Guangzhou on Thursday for a five-day visit that comes amid a growing dispute over a program to stimulate China’s flagging economy that American officials say could hinder U.S. growth.

Yellen last week accused China of “flooding” markets for renewable energy production by heavily subsidizing things like electric vehicles, lithium-ion batteries and solar panels as Beijing seeks to turn around economic woes by boosting production of export goods.

American officials say the cut-price Chinese exports threaten to kill competing industries in other countries before they get off the ground, but China’s government has dismissed those concerns as protectionist and accused the United States of using similar subsidies itself.

During the trip, Yellen, who was also chair of the U.S. Federal Reserve from 2010 to 2014, will travel to Beijing to meet Chinese Central Bank Governor Pan Gongsheng, Chinese Vice Premier He Lifeng and former Vice Premier Liu He, a key economic advisor to President Xi Jinping.

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Chinese workers inspect a solar panel at the Tianxiang Solar Energy Equipment Factory in Huaibei, east China's Anhui province March 21, 2012. (AFP)

Yellen plans to “make clear the global economic consequences of Chinese industrial overcapacity undercutting manufacturers in the U.S. and firms around the world,” a Treasury official told reporters, speaking on condition of anonymity according to pre-set rules.

But it’s unclear how receptive Chinese officials will be. 

Beijing has already largely dismissed the concerns raised by Yellen as hypocritical, pointing to the Biden administration’s tax-breaks tied to electric cars, which exclude many Chinese-made vehicles.

Foreign Ministry spokesman Wang Wenbin said Wednesday that China welcomed Yellen’s trip as a chance to “properly handle differences” and “build up consensus.” But he also rejected complaints about China’s subsidization of emerging and green-energy industries.

Speaking at a daily press briefing, Wang questioned “whether it is ‘excess production capacity’ that the U.S. is truly concerned about,” or if the United States was just upset its businesses were losing out in competition to China due to the “international division of labor.” 

“As for who is engaged in non-market practices, the fact is there for all to see,” he said. “The U.S. side has adopted a string of measures to suppress China’s trade and technology development. This is not ‘de-risking,’ but creating risks. These are typical non-market practices.”

Mushroom for improvement

It’s Yellen’s second trip to China in a year, with the U.S. Treasury secretary having traveled there in July last year amid the early days of the rapprochement between China and the United States.

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Chinese Vice Premier Liu He listens as former President Donald Trump speaks before signing a trade agreement at the White House in Washington, Jan. 15, 2020. (Evan Vucci/AP)

During that visit, Yellen told CNN after returning, she mistakenly ate hallucinogenic mushrooms, which she called “delicious,” at a chain restaurant in Yunnan province called Yi Zuo Yi Wang, or “In and Out.”

“If the mushrooms are cooked properly, which I’m sure they were at this very good restaurant … they have no impact,” Yellen, who is 77, said. “None of us felt any ill effects from having eaten them.”

Potential psychedelics are less likely to feature on the visit this time, but after nearly a year of warmer ties between Washington and Beijing, the trip does come as cracks are starting to reappear in the relationship between the world’s two biggest economies. 

Beijing, for instance, has raised its strong concerns about a White House-backed bill currently before Congress that would allow the U.S. president to ban popular social media platform TikTok in America if its Chinese parent company ByteDance does not sell the app.

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U.S. flag and TikTok logo are seen through broken glass in this illustration taken March 20, 2024.(Dado Ruvic/Reuters)

Xi even directly raised his concerns about the bill during a rare phone call with U.S. President Joe Biden on Wednesday, according to John Kirby, spokesman for the White House’s National Security Council.

“Xi raised the issue and President Biden responded,” Kirby said when asked how TikTok came up during the call between the leaders.

Biden told Xi, he said, that “this was not about a ban on TikTok [but] … about divestiture – that this was about preserving the data security of the American people and our own national security interest.”

Diplomacy

Yellen’s visit to China also comes ahead of next Thursday’s high-profile visit to the United States by Philippine President Ferdinand Marcos, Jr. and Japanese Prime Minister Fumio Kishida, which is being billed by the White House as the first trilateral meeting of the three countries.

The trio this week announced joint naval drills in the South China Sea amid an ongoing dispute between the Philippines and China over the sea’s Second Thomas Shoal, which belongs to the Philippines under international law but is part of a vast territorial claim by Beijing.

A delegation of U.S. lawmakers led by Sen. Jeanne Shaheen, a Democrat from New Hampshire, also recently arrived back from a trip to meet officials in the Philippines, Vietnam, Japan and South Korea.

Shaheen said on Thursday the trip allowed the lawmakers to see first-hand the “threats” from China to other countries with claims to the South China Sea, as Chinese coast guard vessels fired water cannons at Philippine vessels trying to resupply a naval station.

“The threatening maneuvers [and] the militarization of the islands in the South China Sea are all motivators to continue the cooperation that we have with the countries in the region,” Shaheen said, summarizing the take-aways of the seven lawmakers after the trip.

“It has significant impacts on not just the potential for mistakes, militarily, that could be misinterpreted and set off a conflict,” she said, “but also in terms of trade and commerce, and the ability to safely navigate those waters and allow trade to move around the world.”

Also on the trip was Rep. Adriano Espaillat, a Democrat from New York, Democratic senators Kirsten Gillibrand of New York, Mark Kelly of Arizona and Michael Bennet of Colorado, and Republican senators Cynthia Lummis of Wyoming and Roger Marshall of Kansas.

Edited by Malcolm Foster.

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