Chinese Vice Finance Minister Liao Min (second right) and US Ambassador to China Nicholas Burns (right) greet US Treasury Secretary Janet Yellen (right) upon her arrival in Guangzhou on April 4, 2024.
Pedro Pardo | AFP | Getty Images
BEIJING – US Treasury Secretary Janet Yellen began her first full day of official meetings in China by discussing concerns about excess capacity and encouraging the pursuit of pro-market reforms.
Yellen arrived in the southern Chinese city of Guangzhou late Thursday and is scheduled to fly to Beijing on Saturday, where she will remain until Tuesday. This is her second trip to China as Secretary of the Treasury.
Before her scheduled meeting on Friday with Vice Premier He Lifeng, Yellen met with Wang Weizhong, governor of Guangdong Province, of which Guangzhou is the capital.
“Throughout my meetings with my counterparts, I will emphasize that a sound economic relationship can bring significant benefits to our economies,” Yellen said in prepared remarks for her meeting with Wang.
“I also emphasized that building a healthy economic relationship requires a level playing field for American workers and businesses, as well as open and direct communication on areas where we disagree,” Yellen said. “This includes the issue of China’s excess industrial capacity, which the United States and other countries are concerned could cause global spillover effects.”
Chinese government support for manufacturing in recent years has led to a buildup of production capacity that exceeds domestic demand, analysts at US-based consultancy Rhodium Group said in a report issued in late March.
“Many Chinese companies still use overseas markets to compensate for lower prices, margins or even losses in the Chinese market,” the report said.
The Rhodium Group noted that Beijing expressed its awareness and called for more guidance in investment to prevent excess capacity. “However, the solutions adopted are likely to focus on eliminating obsolete capabilities and allowing uncompetitive firms to close while continuing to support capacity expansion, innovation and exports at other firms,” the report said.
Growth potential in China
Guangdong is one of the largest contributors to China's economic growth and home to the city of Shenzhen, a major hub for technology companies and startups. Guangdong is the number one province in China in terms of export value, according to Wind Information.
“In recent decades, [Guangzhou] “She has been at the forefront of market-oriented reforms that have advanced China’s economic development and opening-up,” Yellen said in prepared remarks for her meeting with Wang.
“I know that this city retains enormous importance today, including being a major center for technology and manufacturing,” she added.
China is the second largest economy in the world after the United States. Growth in the Asian country has slowed in the wake of a crackdown on property developers' heavy reliance on debt for growth and alleged monopolistic practices by internet platform companies. Uncertainty over Beijing's policies to boost consumption and overall growth has weighed on corporate and investor sentiment.
Written by Nicholas R. “China will likely continue to contribute about a third of global economic growth as its economic footprint increases, especially in Asia,” Lardy, a senior fellow at the Peterson Institute for International Economics, told Foreign Affairs on Tuesday.
“If American policymakers do not appreciate this, they are likely to overestimate their ability to sustain deepening economic and security ties with Asian partners,” he wrote.
US-Chinese tensions
Yellen's trip to China comes as the two governments try to increase communication in a relationship that has become increasingly tense.
US President Joe Biden and Chinese President Xi Jinping spoke by phone this week for the first time since their in-person meeting in California in November.
Wang Shuwen, vice minister of commerce and head of international trade negotiations, visited the United States from Tuesday to Friday to attend the first vice-minister-level meeting of the bilateral trade working group, according to a ministry statement.
Plans to hold regular meetings of these working groups were announced after Yellen and US Commerce Secretary Gina Raimondo visited China last year.
US Secretary of State Anthony Blinken is expected to make another visit this year, after making a long-awaited visit to China in June 2023.
