Date: 2024-10-07 Page is: DBtxt003.php txt00026495
GEOPOLITICS
USA -v- CHINA
Axios Economy: What’s at stake as Treasury Secretary Janet Yellen visits China
Axios Economy: Yellen: Cutting off economic relations with China isn't 'practical'
USA -v- CHINA
Axios Economy: What’s at stake as Treasury Secretary Janet Yellen visits China
Axios Economy: Yellen: Cutting off economic relations with China isn't 'practical'
Treasury Secretary Janet Yellen before a bilateral meeting with top China officials in San Francisco in November 2023. Photo: Justin Sullivan/Getty Images
Original article:
Peter Burgess COMMENTARY
Peter Burgess
Courtenay Brown, author of Axios Macro
Apr 2, 2024 -
Treasury Secretary Janet Yellen will travel to China for high-stakes meetings this week — her second trip in less than a year amid ongoing tension between the world's two economic powerhouses.
Why it matters: Yellen plans to press an issue that could further intensify China's strained economic relations with the West: what the U.S. sees as China's overproduction of green technology that the nation could dump on the global market, undermining such industries in the rest of the world.
Context: What was once the globe's fastest-growing economy now faces big threats, with huge uncertainty about how China's policymakers will react to that shift.
The Biden administration says China's efforts to boost its factory sector have resulted in a surge of subsidized products — solar panels, electric vehicles and more — that it can offer for cheap, undercutting the White House's industrial policy investments.
Driving the news: President Biden spoke with China's Xi Jinping via phone Tuesday, the first one-on-one conversation since the Chinese leader's visit to the U.S. in November, according to media reports.
Among the issues the two discussed: China's relationships with Russia and Iran as turmoil continues in Ukraine and the Middle East.
What to watch: The Treasury Department says Yellen will hold 'extended' bilateral meetings with Chinese counterparts, including the nation's economic czar, Vice Premier He Lifeng.
Yellen will visit Beijing after a stop in Guangzhou, a key trade and exporting hub that's also home to several foreign firms. There, she will participate in a roundtable about China's economic challenges.
Flashback: Yellen's recent speech at a factory previewed the chief concerns that a senior Treasury official said she will raise with top China officials in the coming days.
'I am concerned about global spillovers from the excess capacity that we are seeing in China,' Yellen said last week. 'China's overcapacity distorts global prices and production patterns and hurts American firms and workers, as well as firms and workers around the world.'
The fear is that the situation parallels one during the Obama administration. Then, China overproduced steel and aluminum products and exported them at depressed prices — warping those industries globally.
The intrigue: Yellen's trip to China is one of the final opportunities for the Biden administration to influence economic relations between the two nations before November's presidential election.
Jitters around China's overcapacity issue come as the U.S. cracks down in other areas, including trade, investment and technology. Lawmakers in Washington are pushing efforts to force China-based ByteDance to sell TikTok — or face a ban in the U.S.
Still, a senior Treasury official said the U.S.-China relationship is on firmer footing than it was two years ago, largely because of improved communication channels between the two nations.
Treasury Secretary Janet Yellen gives a speech at an American Chamber of Commerce event on Friday. Photo: Pedro Pardo/AFP via Getty Images
Axios Economy: Yellen: Cutting off economic relations with China isn't 'practical'
Written by Courtenay Brown, author of Axios Macro
GUANGZHOU, China — Treasury Secretary Janet Yellen told U.S. executives in southern China on Friday that it's neither 'practical nor desirable' to cut off economic relations with the country — even as the Biden administration is moving to contain huge business threats from China.
Why it matters: Yellen is aiming to strike a balance between calling out China for 'unfair practices' she said were hurting American firms — while highlighting the importance of maintaining U.S.-China economic ties.
What they're saying: 'A full economic separation is neither practical nor desirable,' Yellen said. 'We reject the idea that we should decouple our economy from China.'
Yellen said she was addressing her concerns about the economic and business backdrop in China in the 'spirit of continuing to move the U.S.-China relationship in a constructive direction.'Zoom in: Yellen spoke at an event hosted by the American Chamber of Commerce, a China-based group that represents U.S. firms doing business in the region.
Before an audience of business executives in Guangzhou — a trade hub known for its large presence of U.S. firms — Yellen said the Biden administration has watched China's government 'pursue unfair practices' against companies operating in China.
Yellen said that includes imposing high barriers to access for these companies, among other 'coercive' actions.
'I strongly believe that this doesn't only hurt these American firms: ending these unfair practices would benefit China by improving the business climate here,' Yellen said, adding that she plans to bring up these issues in meetings with Chinese counterparts, including the country's top economic policymaker, this week.
The big picture: China's economy is on rocky footing and foreign investment is slumping. That's one reason why leader Xi Jinping met with U.S. chief executives last month in an effort to gin up support for a presence in China.
The Biden administration is wary of other moves the Chinese government is taking to shore up its economy, including offering massive subsidies to its factory sector. The problem, officials say, is that China doesn't have adequate demand to absorb the goods being produced. In her remarks Friday, Yellen doubled down on the warning that China's state aid is causing a production glut of green energy products, like solar panels and electric vehicles.
'Direct and indirect government support is currently leading to production capacity that significantly exceeds China's domestic demand, as well as what the global market can bear,' Yellen said. 'This can undercut the business of American firms and workers, as well as of firms around the world, including in India and Mexico.'
Earlier this week, Yellen said she 'wouldn't rule out' measures, including possibly trade barriers, to protect U.S. companies that might be at risk from China's efforts to unload its slew of products on global markets.
The intrigue: Yellen, a trained economist who previously served as Fed chair, said China would help its domestic economy by changing its subsidies approach.
'It would avoid the resource misallocation that occurs when government subsidies are channeled to firms that wouldn't otherwise be viable,' she said. 'And that's something that would improve Chinese productivity.'
What's next: Yellen will hold extensive talks Friday with Vice Premier He Lifeng, China's economic czar.