The focus of US Treasury Secretary Yellen’s visit to China is to address the issue of overcapacity in the production of electric vehicles, solar panels, and other clean energy products in China, which poses a threat to manufacturers in the US and other countries. Accompanied by Deputy US Treasury Secretary, they met with Chinese Premier Li Keqiang to discuss the issue of overcapacity in China.
US Treasury Secretary Janet Yellen arrived in Guangzhou, China on April 4th to begin a six-day visit. Along with Yellen, Deputy Assistant Secretary of International Affairs Jay Shambaugh from the US Treasury Department was also part of the delegation. They engaged in two days of bilateral talks with Chinese Vice Premier He Lifeng in Guangzhou, followed by a meeting with Chinese Premier Li Keqiang in Beijing, and later with Chinese Finance Minister Liu Fan’an. Yellen also met with former Chinese Vice Premier Liu He and the Governor of the People’s Bank of China, Pan Gongsheng.
Recent reports from The Wire China, hosted by Bob Davis, revealed insights from an interview with Jay Shambaugh, shedding light on the discussions between Yellen and the Chinese leadership regarding efforts to address overcapacity and economic imbalance issues, as well as how to tackle future financial crises and whether China intentionally devalues its currency.
Shambaugh, an economist from George Washington University before joining the Treasury Department in early 2023, emphasized the importance of communication between the US and China on managing disagreements, particularly in the economic sector.
During their visit, discussions between Yellen and the Chinese leadership delved into substantive issues, with a focus on overcapacity in sectors like electric vehicles and solar panels. Shambaugh highlighted the importance of bilateral communication at the highest levels to address concerns and ensure clarity on issues such as China’s overcapacity challenges impacting global markets.
Yellen, prior to her visit, had already underscored the issue of overcapacity in China. At a press conference on April 8th, Yellen elaborated on the challenges posed by excessive investments in industries like new energy vehicles, leading to depressed prices globally and potential hardships for enterprises in Europe and the US.
In addressing criticisms from China about the US economy, Shambaugh noted that discussions primarily centered on achieving balanced growth and addressing the US fiscal deficit rather than extensive critiques from the Chinese side.
During Yellen’s visit, Chinese media responded by refuting US claims on overcapacity issues, emphasizing China’s technological innovation and market competition as drivers of its electric vehicle industry.
China’s Commerce Minister Wang Wentao’s visit to France on April 7th aimed to counter perceptions of overcapacity concerns, asserting that China’s electric vehicle industry’s growth is based on innovation and healthy competition rather than subsidies.
Despite China’s rebuttals, there are acknowledgments within China of overcapacity challenges in various sectors, as highlighted in reports from last year and earlier this year.
Overall, Shambaugh stressed the need for proactive measures to prevent overcapacity risks and urged China to address the issue promptly rather than waiting for a prolonged resolution, given the potential implications on global markets.