Yellen returns to China to address economic challenges bedeviling relations with the United States

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Janet Yellen begins her second visit to… China As Secretary of the US Treasury to continue efforts aimed at strengthening the stability of relations between the two largest economies in the world.

In her first full day of meetings in the major southern city of Guangzhou, Yellen said on Friday that she would address the oversupply of Chinese goods in key industries, such as electric cars and solar panels. The issue quickly emerged as a major area of ​​contention in the run-up to the US presidential election in November.

“I will emphasize that a sound economic relationship can bring great benefits to our economies,” she said at a meeting with leaders of Guangdong Province, the country's manufacturing hub.

“I have also emphasized that building a healthy economic relationship requires a level playing field for American workers and businesses, and open and direct communication in areas where we disagree. This includes the issue of China’s excess industrial capacity, which the United States and other countries worry could cause spillover effects.” At the world level.

US officials and lawmakers have expressed concerns that overinvestment and excess capacity in China could lead to global markets being flooded with cheap products, affecting local industries and jobs.

Asked by reporters on Wednesday whether she would consider erecting trade barriers if China did not heed warnings about excess capacity, Yellen said she “doesn't want to judge.” [it] “Although she wasn't planning to take any immediate action.

Last month, on a visit to Solar panel factory In Georgia, Yellen said that China's excess capacity distorts global prices and production patterns and harms American companies and workers. She added that China is following its long-standing practice of flooding global markets with cheap, state-subsidized steel and aluminum.

The surge in China's exports of electric vehicles, solar energy and batteries creates a problem at a time when the United States has invested heavily in reviving its manufacturing sector.

Yellen left for China on Wednesday shortly after a phone call between US President Joe Biden and Chinese leader Xi Jinping – their first conversation in… A personal historical summit In California last November.

She is scheduled to spend four days in Guangzhou and Beijing, and is expected to meet with Chinese Premier Li Qiang, Vice Premier He Lifeng, his predecessor Liu He, People's Bank of China Governor Pan Gongsheng, and Finance Minister Lan Fu'an.

Tangible results of the trip may be “limited,” said Craig Singleton, senior director of the China program at the Foundation for Defense of Democracies, a nonpartisan think tank in Washington.

“For now, China's primary focus remains portraying itself as open for business and alleviating growing concerns over the meager measures the government has taken so far to address the country's looming economic downturn,” he said.

Yellen told reporters traveling with her to China that the meetings should be seen as a “continuation of the dialogue” between the United States and China since Biden and Xi met in November 2022 at the G20 in Bali.

Biden administration officials have proposed increasing tariffs on Chinese imports to “level the playing field” on trade. As the United States approaches the presidential race, candidates from both parties are trying to appear tough on Beijing. Former President Donald Trump threatened to do so Imposing customs duties of 60% on imports from China If he is re-elected.

Trade tensions are rising as Chinese leaders increasingly use a consolidation strategy Manufacturing for export to compensate for weak demand at home Amidst the loss of economic momentum.

Beijing has pumped money into new industries such as electric cars and batteries It also seeks alternative growth drivers beyond that The real estate sector, one of the main pillars of the Chinese economy, has collapsed.

“China accounts for a third of global production but only a sixth of global consumption, and this reality threatens to fracture the global trading system,” said Rick Waters, managing director of the China practice at Eurasia Group.

Xi's focus on “new productive forces” as the future engine of growth will only make matters worse in the absence of measures that boost domestic consumption.

Xi coined the term “new productive forces” last year, highlighting the need for a new economic growth model based on technological innovation. The “powerhouses” are often referred to as emerging industries such as electric vehicles, new materials and artificial intelligence.

Waters said the conflict over trade was likely to escalate further before the election. He said the Section 301 investigation — which allows the U.S. government to impose tariffs, fees or other restrictions to address unfair trade policies by foreign governments — The potential reorganization of tariffs under Trump to increase barriers to electric vehicles and other imports are all on the table.

Other topics Yellen plans to discuss with her Chinese counterparts include bilateral cooperation in combating illicit finance and work on global issues such as climate change and financial stability, according to the Treasury Department.

But analysts do not believe that Beijing is likely to budge on its economic policies.

“Yellen’s upcoming meetings only expand the illusion of constructive engagement between two superpowers — reinforcing rather than resolving China’s contentious path,” Singleton said.

It is believed that Beijing wants to reduce the role of American multinational companies in supply chains that the Chinese government considers sensitive, while deepening its control over the Chinese private sector and international companies operating in China, pointing to the recently passed law. National security legislation In Hong Kong.

This story has been updated with additional developments.