Yellen says US will not accept Chinese imports decimating new industries

BEIJING: U.S. Treasury Secretary Janet Yellen warned China on Monday that Washington will not accept new industries being decimated by Chinese imports as she wrapped up four days of meetings to press her case for Beijing to rein in excess industrial capacity.

Yellen, making a second trip in nine months to further ease strained ties between the world's two largest economies, has voiced concern about China's fast-growing exports of electric vehicles, batteries, solar panels and other green-energy goods.

She has said China's state support has ramped up its production capacity far beyond what domestic demand can absorb.

Cheap Chinese exports threaten jobs in the U.S. and elsewhere, she said, drawing parallels with the pain felt in the U.S. steel sector in the past.

"We've seen this story before," Yellen told reporters. "Over a decade ago, massive PRC government support led to below-cost Chinese steel that flooded the global market and decimated industries across the world and in the United States."

She added, "I've made it clear that President Biden and I will not accept that reality again."

When the global market is flooded with artificially cheap Chinese products, she said, "The viability of American and other foreign firms is put into question."

Treasury officials have said Yellen did not threaten tariffs or other specific measures against Chinese imports.

Yellen added her exchanges with Chinese officials had advanced American interests and that U.S. concerns over excess industrial capacity were shared by allies in Europe, Japan, Mexico, Philippines and other emerging markets.

She said a possible short-term solution was for China to bolster consumer demand and shift its growth model away from supply-side investment.

Yellen spoke about the issue at length with Premier Li Qiang and also met Finance Minister Lan Foan on Sunday. She met People's Bank of China (PBOC) governor Pan Gongsheng and former vice premier Liu He on Monday.

Treasury officials said the U.S. and China were deepening co-operation on financial stability issues, with two more simulations of financial shocks scheduled after a recent exercise on dealing with the failure of a large bank.

The exercises have been developed by a U.S.-China financial working group formed last year when Yellen first visited China to try to rebuild economic ties. Led by representatives of the U.S. Treasury and the PBOC, it last met in Beijing in January.

PUSHBACK

China’s parliament, the National People’s Congress, said in March the government would take steps to curb industrial overcapacity.

But Beijing argues the recent focus by the United States and Europe on the risks to other economies from China’s excess capacity is misguided.

Chinese officials say the criticism understates innovation by their companies in key industries and overstates the importance of state support in driving their growth.

They also argue that tariffs or other trade curbs will deprive global consumers of green energy alternatives key to meeting global climate goals.

State news agency Xinhua quoted Li as saying the U.S. should "refrain from turning economic and trade issues into political or security issues" and view the topic of production capacity from a "market-oriented and global perspective".

Chinese Commerce Minister Wang Wentao voiced more pointed objections during a roundtable meeting with Chinese EV makers in Paris, saying U.S. and European assertions of Chinese excess EV capacity were groundless.

"China's electric vehicle companies rely on continuous technological innovation, perfect production and supply chain system and full market competition for rapid development, not relying on subsidies to gain competitive advantage," Wang said during his trip to discuss a European Union anti-subsidy investigation.