US concerned about overproduction of Chinese goods

The United States is concerned about the excess production of Chinese goods, which exceeds the needs of the global economy and depresses production in other countries, said US Treasury Secretary Janet Yellen at the end of her visit to China. We are talking primarily about new industries – such as the production of solar panels, batteries and electric vehicles, in which China’s share is rapidly growing. The topic was discussed at bilateral US-China negotiations, but so far, however, the parties could only agree to start a dialogue on issues of balanced economic growth.

Four days ended on Monday visit US Treasury Secretary Janet Yellen visited China – this was her second trip in the last nine months. From the Chinese side, Premier of the State Council Li Qiang, Vice-Premier He Lifeng, as well as the heads of the Central Bank and the Ministry of Finance took part in the negotiations.

At a press conference following the talks, Ms. Yellen said that the United States is not seeking a break with China, as it would have disastrous consequences for both economies. Relations between the parties, she said, have improved over the past year.

• The agreements, however, so far only concern cooperation in the field of combating money laundering and the exchange of information between financial regulators for technical cooperation (in the event of, for example, the bankruptcy of a large bank).
• In addition, the parties agreed to hold a dialogue dedicated to the balanced growth of national and global economies – without specifying specific measures.

The main agenda of the negotiations, judging by the statements of the parties, concerned US concerns regarding the growing volume of production and exports of Chinese products in new industries – in the production of solar panels, batteries and electric vehicles. “Subsidizing these industries depresses output in other countries, just as a decade ago, increased government support for the steel industry depressed its output in the United States and other countries,” said Janet Yellen.

At the talks, the American delegation promised “to prevent a repetition of such a scenario, which poses a threat to domestic production in the United States,” Ms. Yellen said.

Let us recall that two laws were adopted in the United States that provide large-scale support for national manufacturers in the high-tech and green sectors (CHIPS and Science Act and the Anti-Inflation Act); they are aimed, among other things, at reshoring – the return of production transferred abroad back to the United States.

The US Treasury’s arguments include the low level of household consumption in China by global standards, as well as the inflated level of capital investment by companies – the latter, according to the department, is a consequence of large-scale subsidies of production in certain sectors, primarily in high-tech. The country’s influence on the world economy is growing: China, according to Janet Yellen, “produces too much for the rest of the world to absorb this huge volume,” and the policy of the country’s Central Bank can influence the world price level. In response, the Chinese Ministry of Commerce stated that they do not consider the accusations of artificially inflating output volumes to be justified, and Premier of the State Council Li Qiang called on “to refrain from transferring economic issues to the political plane.”

New risks of increased US restrictions are now associated with support for the Russian military-industrial complex – Chinese companies and banks servicing such transactions (including those related to the supply of dual-use products) are subject to the risks of American sanctions, Ms. Yellen warned. The negotiators proposed to more accurately define the boundaries of national security in the economic sphere, making their criteria transparent. So far, no criteria describing the use of such practices have been developed – with reference to national security, since 2018, both the United States and China have introduced multiple restrictions on mutual trade and investment.

Tatiana Edovina