The visit of Janet Yellen, US Secretary of the Treasury, to China has confirmed two things: on the one hand, relations between the two great powers on the planet have entered a phase of stabilization, after overcoming their worst moment in decades; On the other hand, new economic frictions are on the horizon due to the excess productive capacity of the Asian giant in sectors linked to the energy transition. The Treasury Secretary has warned of the “risk” and “negative effects” posed by China’s “macroeconomic imbalances—namely, its weak household consumption and excess business investment, aggravated by large-scale government support.” scale in specific industrial sectors—”, as he stated this Monday in an appearance in Beijing, at the end of his second trip to China in nine months.
Yellen, who has spent five days in the country, has warned of increased business investment driven by China's industrial policy toward electric vehicles, lithium-ion batteries and solar energy. “China is now too big for the rest of the world to absorb this enormous capacity,” he said. “The measures China takes today can alter world prices. And when the global market is flooded with artificially cheap Chinese products, the viability of American and other foreign companies will be called into question.” Washington's fear coincides with that expressed for some time by the European Commission, engaged in a policy of "risk reduction." In September, Brussels began an investigation into alleged state aid to the electric car sector in China, and in recent weeks it has put into practice, against companies in the Asian giant, a novel mechanism designed to prevent foreign subsidies from distorting the single market.
With the US elections around the corner, Yellen has focused on the need to protect American workers and factories. He recalled that the specter of excess productive capacity is not new. His country already faced it more than a decade ago, when “massive support” from the Chinese government for the metal industry led to “below cost” Chinese steel that flooded the world market and decimated industries around the world and in United States". China today produces 55% of global steel, according to Reuters. In her meetings with Chinese leaders — including Prime Minister Li Qiang and Deputy Prime Minister He Lifeng, the economic
czar
— Yellen has made it clear that neither she nor US President Joe Biden will again “accept that reality".
The Secretary of the Treasury has not anticipated the formulas with which they intend to direct the situation. “Exactly what are the right tools… I don't want to get ahead of myself, but I think it is essential that our Chinese counterparts understand the importance we place on this issue. And I think they have tools that they can use to alleviate this problem,” she said before the press gathered at the residence of the American ambassador in Beijing. She has suggested that one of the Chinese Government's options is to encourage the consumption of its 1.4 billion inhabitants, to correct the imbalances of excess supply by increasing demand.
The problem has no easy solution. Beijing has made the commitment to what it calls the “new productive forces” the priority of its development policy this year. Launched by Xi Jinping last year, it is the hottest concept in the Chinese capital, and regional and local governments and businesses in the country have immediately aligned themselves with the guidelines. China intends to accelerate the modernization of emerging industries as a transition formula in the face of an economy affected by the real estate crisis and with GDP far from the double-digit increases of yesteryear. Although support for these sectors has been underway for years, and has become part of the industrial DNA. As a senior Chinese executive at a battery company recently confided: the issue has now moved beyond the point of public policy support to a market-driven phase.
“The development of the Chinese new energy industry will contribute significantly to the global transition towards a green, low-carbon economy,” defended Chinese Prime Minister Li Qiang to Yellen during their meeting on Sunday in Beijing. . Li has demanded that the United States consider the issue of production capacity “objectively” and “from a global and market-oriented perspective.” And he has asked him to “refrain from turning economic and commercial issues into political or security issues,” according to the official Xinhua agency.
Beijing and Washington have agreed that diplomatic relations show “signs of stabilization”, after the last meeting in San Francisco, last November, between the presidents of both countries, Xi Jinping and Joe Biden; and the telephone conversation they had last week. Senior officials from both countries have launched phrases intended to prove that appeasement: “As the world's two largest economies, China and the United States have deeply intertwined economic interests,” Li said. “I have once again stressed that the United States does not intend to disengage from China,” Yellen replied. ”A total separation would be disastrous for both”
They have also sent signals that they seek cooperation and dialogue to resolve disputes. They have announced that the meetings of working groups on economic and financial matters will continue; the implementation of mechanisms to combat money laundering – a key step in the battle against the epidemic of fentanyl addiction in the United States, many of whose chemical precursors come from China, according to Washington; and also coordination formulas against
financial
shocks .
In any case, there remain numerous rough edges to iron out; “difficult conversations about national security,” Yellen has called them. “We remain concerned about the role that any company, including those in the People's Republic of China, is playing in Russia's military procurement. “I have stressed that companies, including those in the PRC, should not provide material support to Russia's war and that they will face significant consequences if they do so,” he said.
They have also touched on the issue of TikTok, the Chinese video social network that has become a new episode of the technological struggle between superpowers. The US House of Representatives passed a bill in March that would force TikTok's Chinese parent company, ByteDance, to sell the popular short video app if it does not want to face a veto in this country. The proposal still has to be ratified by the Senate, but Biden has assured that he will sign the Law if it passes the filter. “Our concern here has to do with sensitive personal data and its protection. And this is a legitimate concern,” Yellen concluded.
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