US Treasury Chief Yellen Pursues Closer China Ties But Calls Out Excess Manufacturing Concerns

The U.S. Treasury Secretary, Janet Yellen, has commenced her four-day visit to China, pledging to strengthen economic relations while cautioning against the global risks associated with China’s manufacturing overcapacity.

What Happened: Yellen, during her meeting with Wang Weizhong, governor of Guangdong, an industrial hub, emphasized the significance of a “healthy economic relationship” and a “level playing field for American workers and firms”. She also underscored the need for open dialogue in areas of disagreement between the two nations, reported Bloomberg.

“This includes the issue of China's industrial overcapacity, which the U.S. and other countries are concerned can cause global spillovers,” Yellen said.

Despite some improvements in the relationship between the world’s two largest economies, deep-seated differences remain. These differences have been exacerbated by China’s increased manufacturing investment, a response to the country’s real estate downturn.

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Yellen has previously criticized China’s use of subsidies to give key industries a competitive edge, arguing that Chinese over-investment and excess capacity are distorting the global economy.

Yellen is likely to encounter resistance during her visit over the Biden administration’s attempts to rejuvenate American manufacturing through government support for semiconductors and green energy.

Why It Matters: Yellen’s visit to China comes amid ongoing economic tensions between the two nations. The Treasury Secretary has previously voiced concerns about China’s green energy exports, stating that they “hurt American firms and workers.”

Furthermore, Yellen and President Biden have expressed concerns that China might “flood” global markets with solar panels and electric vehicles (EVs). This comes as the EV market continues to grow, with companies like Tesla and Chinese automaker BYD vying for global dominance.

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