US Treasury Secretary Janet Yellen called on China on Friday to address excess manufacturing capacity that she said risks causing global economic disruption, and create a level playing field for American companies and workers.
At the start of a five-day visit to one of China's major industrial and export centers, she raised what the United States considers unfair Chinese trade practices in her talks with senior Chinese officials.
“The United States seeks to establish a healthy economic relationship with China that benefits both sides,” she said before her meeting with Chinese Vice Premier He Feng, the governor of the central bank and other officials in the southern city of Guangzhou. “But a healthy relationship must provide equal opportunities for companies and workers in both countries.”
Earlier, she said at an event hosted by the American Chamber of Commerce in China that “Chinese practices… skew the playing field away from American workers and companies.”
The Chinese president did not go into details in his remarks to the media, but said that both sides “need to respond appropriately to the other side's major concerns.”
The issue of excess capacity is at the top of Yellen's list. Chinese government subsidies and other forms of political support have encouraged Chinese solar panel and electric vehicle makers to invest in factories and build production capacity far greater than the domestic market can absorb.
The sheer scale of production has driven down costs and ignited price wars for green technologies, a boon for consumers and efforts to reduce global dependence on fossil fuels. But Western governments fear that this ability will lead to flooding their markets with low-priced exports, which threatens American and European jobs.
Yellen, the first Cabinet member to visit China since President Biden and Chinese leader Xi Jinping met last November, said it was important for the United States and China to have open and direct communications on areas of disagreement.
“This includes the issue of China's excess industrial capacity, which the United States and other countries are concerned could cause spillover effects at the global level,” she said during a meeting with Wang Weizhong, governor of Guangdong Province.
Guangzhou is the capital of Guangdong, a Chinese manufacturing hub that is home to telecom giant Huawei and BYD, China's largest electric vehicle maker. Huawei has been hard hit by US restrictions on semiconductor exports to China, and is at the forefront of Chinese efforts to become self-sufficient and a technology leader.
As in her previous trip to China last July, Yellen caught social media attention for dining at a popular restaurant after her arrival on Thursday evening.
A social media account run by Chinese state media posted a flattering video of her dining with the US ambassador and other officials at Tao Tao Gu, a Guangzhou restaurant dating back to 1880.
The post, which was one of the most viewed on the microblogging app Weibo the next morning, praised Yellen for holding her chopsticks well, but added: “As an American official, Yellen needs to know more about China than she does.” Just food. Only by learning more about China can we correct the American view of the world, of China, and of Sino-American relations.
Yellen, who is traveling to Beijing from Guangzhou, met with US, European and Japanese business representatives before her talks with He.
“I have heard from many American businessmen that business in China can be challenging,” she said at the event organized by the US Chamber of Commerce in a marble convention center.
Citing a recent survey by the business group that found that a third of American companies in China say they have experienced unfair treatment compared to domestic competitors, Yellen said the United States saw China “pursuing unfair economic practices, including imposing barriers to access for foreign companies.” And take coercive measures against American companies.”
“I strongly believe that this does not just hurt these American companies: ending these unfair practices will benefit China by improving the business climate here,” she said in her speech.
China has addressed concerns about excess capacity expressed by the United States and Europe.
Foreign Ministry spokesman Wang Wenbin said earlier this week that the growth of Chinese electric vehicle and solar energy exports is conducive to global green development and a result of the international division of labor and market demand.
He accused the United States of interfering in free trade by restricting technology exports to China.
“As for who is doing the non-market manipulation, the truth is that everyone sees it,” he said. “The United States has not stopped taking measures to contain China's trade and technology. This does not mean 'derisking,' it creates risks.”
Yellen said at the US Chamber meeting that concern about excess capacity is shared by many other countries, both developing and rich.
“This is not an anti-China policy,” she said. “It is an effort on our part to mitigate risks from the inevitable global economic disruption that will occur if China does not adjust its policies.”
Expectations for the Chinese government's response are low, said Scott Paul, president of the American Manufacturing Alliance, a coalition of companies and the United Steelworkers union.
“The one thing Yellen hopes to say, and should, is that the United States is prepared to use all the tools at our disposal through policy to ensure that China’s excess industrial capacity does not adversely harm our national economic and security interests,” he told the Associated Press. Press ahead of Yellen's trip.
The coalition released a report in February that said the introduction of cheap Chinese cars into the U.S. market “could end up being an extinction-level event for the U.S. auto sector.” This sector represents 3% of the American economy, according to the report.
Yellen told reporters during a refueling stop in Alaska on her way to China that the United States “will not rule out” tariffs to respond to China's heavily subsidized manufacturing of green energy products.
Associated Press writers Hussein reported from Guangzhou and Moritsugu from Beijing. AP researcher Wanqing Chen in Beijing contributed to this report.
