BEIJING: US 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 told a press conference that US President Joe Biden would not allow a repeat of the "China shock" of the early 2000s, when a flood of Chinese imports destroyed about 2 million American manufacturing jobs.
But she declined to threaten new tariffs or other trade actions should Beijing continue its massive state support for electric vehicles, batteries, solar panels and other green energy goods.
Yellen used her second trip to China in nine months to complain that China's overinvestment has built factory capacity far exceeding domestic demand, while fast-growing exports of these products threaten firms in the US and other countries.
She said a newly created exchange forum to discuss the excess capacity issue intensively would seek to tackle the issue, but would need time to reach solutions.
Yellen drew parallels to the pain felt in the US steel sector in the past.
"We've seen this story before," she 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." Yellen 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." Yellen added that her exchanges with Chinese officials had advanced American interests and that US 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 take steps to bolster consumer demand with support for households and retirement, and shift its growth model away from supply-side investments.
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 US 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 US-China financial working group formed last year when Yellen first visited China to try to rebuild economic ties. Led by representatives of the US Treasury and the PBOC, it last met in Beijing in January. — Reuters
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