Yellen Initiates Confrontational Discussions Concerning China’s Excessive Production Threat

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U.S. Treasury Secretary Janet Yellen embarked on four days of discussions with senior Chinese officials on Friday, with a significant focus anticipated on the ramifications of China’s surplus manufacturing capacity and the increasingly challenging business environment confronting U.S. companies.

Yellen is scheduled to meet with Guangdong Province Governor Wang Weizhong and Vice Premier He Lifeng in a continuation of U.S.-China economic relations. However, these discussions are expected to be more contentious than previous engagements due to the sensitive subject matter.

Amid growing concerns within the Biden administration, Yellen intends to address China’s overproduction of electric vehicles, solar panels, semiconductors, and other commodities, which are flooding global markets amidst a domestic demand downturn. She will assert that this practice is detrimental to China’s own interests and is harming producers in other nations.

During her meeting with Wang, Yellen emphasized the necessity for a “level playing field” for U.S. workers and companies, emphasizing the importance of transparent and direct communication between Washington and Beijing regarding areas of disagreement.

“This includes the issue of China’s industrial capacity, which the United States and other countries are concerned could lead to global repercussions,” Yellen stated at the outset of the bilateral talks.

Some trade experts interpret the heightened U.S. criticism of China’s production-oriented, subsidy-driven economic model as a precursor to potential increases in U.S. tariffs on Chinese electric vehicles and clean energy products to safeguard domestic industry.

While Yellen refrained from issuing explicit threats of new trade barriers, she indicated during her visit to Guangzhou that she would not rule out further measures to shield emerging American supply chains for electric vehicles, batteries, solar power, and other goods from competitively priced Chinese imports.

Although the Treasury does not anticipate a significant shift in Chinese policy resulting from these meetings, it underscores the importance of elucidating the global issues arising from excessive investment in these sectors.

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