By David Lawder
GUANGZHOU, China (Reuters) – U.S. Treasury Secretary Janet Yellen kicks off four days of talks with senior Chinese officials on Friday that are expected to focus largely on the fallout from China’s excess manufacturing capacity and an increasingly difficult economic climate for US companies.
Yellen will meet with Guangdong Provincial Governor Wang Weizhong and Vice Premier He Lifeng to continue US-China economic relations. But these talks will likely be more contentious than past engagements due to the more difficult subject matter.
Yellen and other Biden administration officials are increasingly concerned about China’s overproduction of electric vehicles, solar panels, semiconductors and other goods that are flooding into global markets amid a collapse in domestic demand. He plans to argue that this is unhealthy for China and is hurting producers in other countries.
Some trade experts see growing U.S. criticism of China’s economic model focused on manufacturing, subsidies and debt as a first step toward raising U.S. tariffs on Chinese electric vehicles and clean energy goods to protect the industry American.
Yellen stopped short of raising any threat of new trade barriers, but said during her trip to Guangzhou that she would not rule out further action to protect a nascent American supply chain of electric vehicles, batteries, solar power and other goods from cheap Chinese imports reduced.
The Treasury does not expect a major change in Chinese policy as a result of the meetings, but it was important to explain the problems that overinvestment in these sectors is causing around the world.
Chinese state media is dismissing US concerns over production capacity as a double standard “against China.”
“While it is simply an economic fact that surplus products will naturally seek markets elsewhere once domestic demand is satisfied, and Western nations have done so for centuries, when it comes to China, it becomes an “excess capacity problem” that threatens the world,” China Daily said.
PARALLEL MEETINGS
Yellen’s meetings, which continue in Beijing from Saturday to Monday, come soon after officials from the U.S. Department of Commerce and China’s Ministry of Commerce met in Washington on Thursday to discuss trade and investment issues.
The senior U.S. official in those talks also expressed “strong concerns about growing overcapacity in a number of Chinese industrial sectors,” the department said in a statement.
Lago also reaffirmed the goal of a healthy trade and investment relationship “that benefits U.S. workers and businesses, while emphasizing that the United States will not negotiate on matters related to national security,” Commerce said.
Chinese Vice Minister of Commerce Wang Shouwen also expressed several concerns, such as US tariffs on Chinese imports, sanctions and unfair treatment of Chinese companies, generalization of national security and investment restrictions.
“The economic and trade relations between China and the United States should be a stabilizing force,” Wang said, according to a statement from the Ministry of Commerce on Friday.
Yellen will also meet with international business leaders in Guangzhou on Friday and attend an American Chamber of Commerce event.