U.S. Treasury Secretary Janet Yellen has arrived in China for a
six-day visit, a trip she said was necessary to “advance America’s
economic and national security interests.”
Ms. Yellen landed in
the southern Chinese export hub of Guangzhou on April 4. Before her
arrival, she took to social media platform X to explain the objectives
of her trip.
“During my time in China, I’ll focus on advancing a
healthy economic relationship that provides a level playing field for
American workers and firms, and furthering cooperation on shared
challenges like illicit finance and climate change,” she wrote.
The Treasury Department said her trip, the second in less
than a year, aims to press her Chinese counterparts on Washington’s
concerns about the regime’s “unfair trade practices” and “industrial
overcapacity,” which poses a threat to economies across the world.
She
did not rule out the possibility that the Biden administration would
impose tariffs or other trade barriers on China to protect U.S. green
energy industries negatively affected by China’s overproduction.
“We
are trying to nurture an industry in, for example, solar cells,
electric batteries, electric vehicles, and these are actually all areas
where we think that massive investment in China is creating some
overcapacity,” she said during a stopover in Alaska.
“I wouldn’t want to rule out other possible ways in which we would protect them.”
Ms.
Yellen will start her mission by meeting with Wang Weizhong, the
provincial governor of Guangdong, and vice premier He Lifeng, who
oversees China’s economic and financial systems, on April 5, according
to the schedule released by her department. She will have additional
talks with the former vice premier, Liu He, who retired from China’s
leadership last year but was said to remain an influence on
policymaking.
Before heading to Beijing on April 6, the Treasury’s chief will also sit down with representatives from U.S. businesses operating in China. Ms. Yellen confronted the Chinese communist regime’s coercive measures against U.S. firms during her first visit to China as treasury secretary in July 2023. Following that trip, her department set up two working groups with China’s financial ministry to deal with economic and financial issues.
Industrial Overcapacity
China is seeking to boost its slowing economy by pumping more cash into the manufacturing sectors at a time of weak demand at home. Western economies have become increasingly wary of a flood of cheap China-made products being dumped on the international market, especially in clean energy sectors such as solar panels and electric vehicle (EV) batteries.
Ahead of her trip, Ms. Yellen warned that Beijing’s state subsidies have resulted in “substantial overinvestment” and “excess capacity” in steel, aluminum, and other sectors, which has prompted Chinese manufacturers to sell their products overseas at low prices and forced businesses in the rest of the world to contract.
“Now,
we see excess capacity building in new industries like solar, EVs, and
lithium-ion batteries,” Ms. Yellen said during a visit to a solar module
plant in Georgia that was shut down because of cheap Chinese imports.
“We
have raised overcapacity in previous discussions with China, and I plan
to make it a key issue in discussions during my next trip there. I will
press my Chinese counterparts to take necessary steps to address this
issue.”
According to a renewable energy forecast report published by the International Energy Agency in January, China nearly doubled solar panel manufacturing capabilities in 2023, creating what the agency called a “global supply gut,” while reducing its solar module prices by almost 50 percent.
“Established
Chinese manufacturers (often vertically integrated companies benefiting
from various public incentives) are largely responsible for module
price drops. Such companies enjoy high production cost efficiencies
thanks to the economies of scale they can achieve, which will remain
unmatched by any other country in the medium term,” the report reads.
The European Union is moving closer to imposing tariffs on battery EVs from China. In a document released in March, the European Commission, the EU’s executive branch, said it has found “sufficient evidence” to show that Chinese authorities subsidize its EV industry. It also found massive imports of electric cars from China in a relatively short period of time, saying that the imports rose by 14 percent since it opened the probe in October 2023 compared with a year earlier.
In the United States, the Commerce Department also opened an investigation into Chinese “smart cars,” citing data security concerns. Lawmakers have called upon the Biden administration to increase tariffs on EVs originating from China. But industrial groups worry that the auto tariff alone won’t be enough to address the issue, given that Chinese automakers are establishing assembly plants in third countries, such as Mexico.
Chinese Vice Minister of Finance Liao Min (2nd R) and U.S. Ambassador to China Nicholas Burns (R) receive U.S. Treasury Secretary Janet Yellen (L) upon her arrival at the Baiyun International Airport in Guangzhou, China, on April 4, 2024. (Pedro Pardo/AFP via Getty Images)
There are signs that China will not respond to Ms. Yellen’s concerns. China’s hawkish state-run outlet Global Times called U.S. overcapacity concerns “a stray from facts” and “an ill-intended campaign to smear China,” in an article published on April 3 quoting a Chinese researcher.
China Ties
Ms. Yellen’s trip is the start of another round of the Biden administration’s diplomatic engagement with the Chinese communist regime ahead of the U.S. elections in November.
On April 2, President Joe Biden spoke with Chinese regime leader Xi Jinping by telephone, their first conversation since face-to-face meetings in San Francisco in November 2023.
A senior administration official told reporters before the call that aside from Ms. Yellen’s visit, Secretary of State Antony Blinken, who visited Beijing in July 2023, would return to China in “the coming weeks.” Secretary of Defense Lloyd Austin is expected to have the first contact with China’s new defense minister “soon.”
Shen
Yu-chung, a political professor at Taiwan’s Tunghai University, said
Washington’s recent move implies the Biden administration seeks to curb
risks while avoiding cutting all ties to communist China.
“In
other words, the United States still considers China a competitor,” Mr.
Shen told The Epoch Times on April 3. “But [Ms. Yellen’s] visit does not
imply that the two sides begin to reconcile.”
Mr. Shen cautioned that the U.S.–China relationship could only become more competitive, especially in the defense industry and sectors involving advanced technology, in the run-up to the U.S. presidential election.
Former President Donald Trump has already promised to impose massive tariffs if he returns to office, including a 60 percent duty on Chinese goods and a 10 percent duty on goods imported from all over the world. That is likely to pressure President Biden to adopt a tougher stance on China ahead of November’s Election Day.
Trade
with the United States remains a key issue for the Chinese regime. “Xi
Jinping appears to face great pressure regarding its economy,” Mr. Shen
said.
Amid an ongoing housing crisis, Chinese authorities have struggled to revive the country’s sluggish economy as local governments are burdened with massive debts, consumers are reluctant to spend, and foreign companies pause new investments.
In
2023, foreign direct investment in China stood at $33 billion, down 82
percent from a year earlier, according to China’s official data released
in February. The latest annual figure was also the lowest since 1993.
In March, China set the 2024 gross domestic product target at about 5 percent, a figure that experts have said is overly optimistic given China’s struggling economy.
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