Chinese subsidies to industry, “a risk” for the global economy, says Yellen

(Canton) US Treasury Secretary Janet Yellen said in China on Friday that subsidies paid by Beijing to industry represented “a risk to global economic resilience”, by creating “overcapacity” of production.

Janet Yellen arrived in China on Thursday for four days – her second visit in less than a year – with a first stop in Guangzhou (south) before going to Beijing on Saturday.

“The government’s direct and indirect aid is leading to production capacity that far exceeds China’s domestic demand, as well as what the global market can support,” Ms.^me Yellen to American entrepreneurs working in this country.

“Overcapacity can lead to large volumes of exports at falling prices” and “overconcentration of supply chains, posing a risk to global economic resilience,” she added, a threat according to her. for the viability of American businesses and other countries.

In recent weeks, Janet Yellen has warned against the Chinese government’s vast subsidies in technologies, whether green energy, electric vehicles or even batteries.

Expressing such concerns is not part of an “anti-China policy”, assured the Minister of Finance during a question-and-answer session after her intervention, but aims to mitigate the risks linked to “the inevitable dislocation of the global economy that will result from maintaining such a Chinese strategy.

“Healthy relationship”

During this meeting, organized by the American Chamber of Commerce, Mr.^me Yellen promised to discuss with Chinese officials the “difficulties” encountered by American groups present in China.

And in particular, the fact that Beijing “imposes barriers to access for foreign companies and takes coercive measures against American groups”.

“I am convinced that this not only harms American companies: an end to these unfair practices would benefit China by improving the business climate there,” she said.

Friday, M^me Yellen also met with Vice Premier He Lifeng. The latter said he hoped for “new in-depth discussions on important subjects for China, the United States and the economic and financial world”.

These discussions should make it possible to “provide appropriate responses to the main concerns in economic relations between China and the United States”.

Washington had said it expected this dialogue to address sensitive issues such as American restrictions against China, taken in the name of national security, as well as Beijing’s economic support for Moscow.

In the morning, Janet Yellen met the governor of Guangdong province, the richest in the country and emblematic of Chinese manufacturing power: she assured him that the United States wants “a healthy economic relationship” with China.

But this requires “a level playing field for American companies and their employees,” she stressed.

Beijing has so far brushed aside concerns about its strong support for its industries. Last month, Chinese authorities condemned as “protectionism” the investigation launched by the European Union into Chinese subsidies for electric vehicles.

American concerns are expressed at a time when President Joe Biden wants to boost United States production in green energies, hoping to make it a campaign argument as he aims for re-election in November.

Electric vehicles

Particularly sensitive subject for the Biden administration: the fears of the American automobile sector in the face of Chinese ambitions in terms of electric vehicles, a crucial subject in an election year, underlines Paul Triolo, China specialist for the American consulting firm Albright Stonebridge Group.

“It is likely that the (Biden) administration will take steps to demonstrate its willingness to act preemptively to avoid future problems related to Chinese overcapacity in electric vehicles,” he predicts.

But Beijing should then “react negatively”, warns the expert.

In China, Janet Yellen will meet Prime Minister Li Qiang, Finance Minister Lan Fo’an and Central Bank Governor Pan Gongsheng.

Bilateral relations have been strained in recent years due to several issues: Taiwan, rivalry in new technologies, the struggle for influence in the Asia-Pacific and even human rights.

But the two countries seem eager to renew dialogue, particularly since a successful meeting in November between Joe Biden and Chinese President Xi Jinping in California. The two men spoke on the phone this week.

Janet Yellen’s visit to China in July 2023 helped stabilize the relationship, in particular thanks to the creation of bilateral working groups on the economy and finance.

American Secretary of State Antony Blinken is expected in China in the coming weeks, a new sign of the resumption of normal trade between the two powers.