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Chinese subsidies endanger world economy, says US' Yellen

April 5, 2024

US Treasury Secretary Janet Yellen has said that China's subsidy-fueled "overcapacity" could overload the global market. Beijing has dismissed such concerns in the past.

US Treasury Secretary Janet Yellen, left, is in China for five days of meetings
Yellen is on here second visit to China in less than a yearImage: Andy Wong/AP/Pool/dpa/picture alliance

US Treasury chief Janet Yellen on Friday warned that China's huge subsidies for its industry could pose a risk to the global economy, and called for a "level playing field" above all for American firms.

Yellen was speaking to a gathering of the American business community in the city of Guangzhou, where she will hold several days of talks with Chinese officials during what is her second visit to China in less than a year.

What did Yellen say?

In her speech at the American Chamber of Commerce, on Friday, Yellen accused China of disadvantaging foreign firms in favor of its own.

"I've heard from many American business executives that operating in China can be challenging," she said. 

She said that the US has observed China pursuing "unfair economic practices, including imposing barriers to access for foreign firms and taking coercive actions against American companies."

"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. I intend to raise these issues in meetings this week," she said.

 A robot arm produces solar photovoltaic modules at a smart workshop in Nantong, Jiangsu province,
China has massively subsidized its solar panel industry, among others, potentially disadvantaging foreign competitorsImage: Costfoto/NurPhoto/picture alliance

On the question of China's subsidies for its industry, Yellen said they risked undermining global economic resilience.

"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," she said.

"Overcapacity can lead to large volumes of exports at depressed prices, and it can lead to overconcentration of supply chains, posing a risk to global economic resilience," she added.

Earlier, she told the governor of Guangong that the "healthy economic relationship" desired by the US required "a level playing field for American workers and firms."

During her five-day trip, Yellen plans to meet with Chinese Premier Li Qiang and Vice Premier He Lifeng, as well as central bank governor Pan Gongsheng and Finance Minister Lan Fo'an.

Beijing resistant to criticism

Beijing has said that such concerns over its vast state support for industry is unfounded, accusing the West of "protectionism."

However, Washington is particularly worried about the effect China's excess capacity could have on US manufacturing in the clean energy sector, which has been boosted by President Joe Biden.

In particular, China has given huge financial assistance to EV makers and solar panel producers, fueling Western fears that low-priced Chinese exports will threaten American and European jobs.

Light-blue SU7 car from Xiaomi is displayed during the Mobile World Congress (MWC) in Barcelona
China is a market leader with electric vehiclesImage: Gao Jing/Xinhua/picture alliance

Relations particularly between the US and China have often been strained in recent years, with issues such as technology, trade, human rights and Beijing's aggressive stance on Taiwan all bones of contention.

However, a meeting between Biden and Chinese President Xi Jinping in San Francisco in November has contributed to a warming of bilateral ties.

US Secretary of State Antony Blinken is also expected to soon visit China again in a sign that the two sides are striving to return to more settled relations.

tj/lo (Reuters, AFP)