By David Lawder
GUANGZHOU, China (Reuters) -U.S. Treasury Secretary Janet Yellen on Friday launched four days of talks with senior Chinese officials expected to focus heavily on spillovers from China’s excess manufacturing capacity and an increasingly challenging business climate for U.S. firms.
Yellen will meet with Guangdong Province Governor Wang Weizhong and Vice Premier He Lifeng in a continuation of U.S.-China economic relations. But these talks are likely to be more contentious than past engagements due to the more difficult subject matter.
Yellen and other Biden administration officials are growing increasingly concerned about China’s overproduction of electric vehicles, solar panels, semiconductors and other goods that are flooding into global markets in the face of a demand slump at home. She plans to argue that this is not healthy for China and is hurting producers in other countries.
Yellen told Wang that she will emphasise the need for a “level playing field” for U.S. workers and firms, and that Washington and Beijing must maintain open and direct communications on areas where they disagree.
“This includes he issue of China’s industrial capacity, which the United States and other countries are concerned can cause global spillovers,” Yellen said at the start of a bilateral meeting.
Some trade experts see the increased U.S. criticism of China’s production-focused, subsidy and debt-driven economic model as an initial step towards raising U.S. tariffs on Chinese EVs and clean energy goods to protect U.S. industry.
Yellen has shied away from raising any threats of new trade barriers, but said during her journey to Guangzhou she will not rule out more actions to protect a fledgling American supply chain for EVs, batteries, solar power and other goods from cut-price Chinese imports.
The Treasury is not expecting a major shift in Chinese policy as a result of the meetings, but it was important to explain the problems that overinvestment in these sectors are causing around the world.
Chinese state media are pushing back on U.S. concerns about manufacturing capacity as a “China-bashing” double standard.
“While it is just basic economics that surplus products naturally seek out markets elsewhere once domestic demand is met, and Western nations have been doing that for centuries, when it comes to China, it becomes an “overcapacity problem” threatening the world,” the China Daily said.
PARALLEL MEETINGS
Yellen’s meetings, which continue in Beijing on Saturday through Monday, come just after U.S. Commerce Department and Chinese Commerce Ministry officials met in Washington on Thursday to discuss commercial and investment issues.
The top U.S. official in those, talks Commerce Undersecretary Marisa Lago, also raised “strong concerns regarding growing overcapacity in a range of Chinese industrial sectors,” the department said in a statement.
Lago also reaffirmed the goal of a healthy trade and investment relationship “that benefits U.S. workers and businesses, while underscoring that the United States will not negotiate on issues related to U.S. national security,” Commerce said.
China Vice Minister of Commerce Wang Shouwen also expressed several concerns such as U.S. tariffs on Chinese imports, sanctions and unfair treatment of Chinese companies, the generalization of national security and investment restrictions.
“The economic and trade relations between China and the United States should be a stabilising force,” Wang said, according to a statement from the commerce ministry on Friday.
Yellen on Friday will also meet with international business leaders in Guangzhou and participate in an American Chamber of Commerce event.
