U.S. Treasury Secretary Janet Yellen and Chinese Vice Premier He Lifeng recently concluded two days of economic talks in Guangzhou, China. Yellen stated that they agreed to launch exchanges on “balanced” economic growth to address U.S. concerns about China’s excess manufacturing capacity. Additionally, they agreed to start a forum to cooperate on anti-money laundering efforts in their respective financial systems. Yellen characterized the discussions as productive and frank, focusing on macroeconomic imbalances and overcapacity. Her main priority was to persuade Chinese officials to rein in excess production capacity for electric vehicles, solar panels, and other clean energy technology, which poses a threat to firms in the U.S. and other countries.
The Biden administration is under pressure to increase tariffs on Chinese EVs to protect U.S. producers, but Yellen did not threaten to raise tariffs or impose other trade barriers during the talks. She emphasized the need for a “structured” way to discuss the issue, acknowledging that it would take time to resolve. Chinese officials expressed confidence in their economy after implementing policies to address issues in the property sector and local government debt. Both parties agreed to further discuss balanced growth and financial stability.
The U.S. Treasury official stated that the balanced growth forum was proposed in February and is a positive development. However, some experts warn that it could turn into a stalling tactic by Beijing. Yellen also warned Chinese firms about providing support to Russia’s invasion of Ukraine, to which the Chinese side emphasized their policy to refrain from providing such support.
Xinhua, a Chinese news agency, criticized Yellen’s stance, accusing the U.S. of using the pretext of “Chinese overcapacity” in the clean energy sector to implement protectionist policies. Despite not expecting a major shift in Chinese policy after Yellen’s visit, U.S. officials believe it was important to explain the economic risks that overinvestment in certain sectors presents to China and its trading partners.
Yellen will continue her discussions with Chinese officials in Beijing, where she is scheduled to meet with Premier Li Qiang, Finance Minister Lan Foan, and People’s Bank of China Governor Pan Gongsheng.
