U.S. Treasury Secretary Janet Yellen concluded her visit to China with a firm warning regarding the potential repercussions of Chinese imports on American industries.
Yellen emphasized President Biden‘s commitment to prevent a recurrence of the devastating impact experienced in the early 2000s, commonly known as the “China shock,” which resulted in the loss of millions of American manufacturing jobs.
Despite refraining from immediate trade actions, Yellen underscored the urgent need for Beijing to address its significant state support for industries such as electric vehicles (EVs), batteries, and solar panels, which pose a threat to international competitors.
During her visit, Yellen highlighted the issue of overcapacity resulting from China’s overinvestment, which has led to a surplus of production far exceeding domestic demand.
She stressed the necessity for collaborative solutions, mentioning a newly established exchange forum dedicated to addressing this challenge.
Yellen drew parallels with past experiences, particularly in the U.S. steel sector, where massive government support from China led to a flood of below-cost steel in the global market, adversely affecting industries worldwide.
Chinese officials expressed their discontent with perceived trade restrictions and defended their market advantages and innovative capabilities.
They argued against the imposition of tariffs, emphasizing the importance of green energy alternatives in achieving global climate goals. They highlighted the potential violation of World Trade Organization (WTO) rules should trade curbs be imposed on Chinese EVs.
Yellen proposed a shift in China’s growth model towards bolstering consumer demand and reducing reliance on supply-side investments.
She engaged in extensive discussions with Chinese officials, including Premier Li Qiang and Finance Minister Lan Foan, underscoring the gravity of the situation.
Despite emphasizing a focus on macroeconomic shifts rather than immediate trade actions, Yellen reiterated that tariffs remained a possibility if necessary.
