- China’s industrial overcapacity was high on agenda.
- Premier Li and Yellen expressed hope for further China-US cooperation.
- Intensive exchanges on the need for balanced economic growth.
- Extensive dialogues were held on money laundering, climate change, and debt.
During her recent five-day visit to China, US Treasury Secretary Janet Yellen endeavored to reinforce bilateral relations while addressing long-standing trade tensions. This trip, Yellen's second within eight months, took on significance given the complexity of the US-China relationship. Through a string of carefully scheduled meetings, the Secretary aimed to preserve open lines of communication at the highest levels, though she also directly confronted challenging topics.
US view
In her initial meeting with Chinese Vice Premier He Lifeng in Guangzhou, Yellen broached excess industrial capacity in China, arguing overproduction in strategic sectors by Chinese firms undermines American companies and risks worsening trade imbalances. She highlighted renewable energy and electric vehicles as exemplars and called for remedial action to rectify distortions and ensure fair competition globally. Delivering remarks to the American Chamber of Commerce in China, Yellen doubled down on calls for a "level playing field" devoid of subsidies or market access barriers creating unfair advantages.
China view
Beijing rejects such assertions, claiming penalties imposed on efficient Chinese enterprises stem from inability to compete on cost. Resolution of these complex trade issues remains elusive as China redirects investment to sectors like clean energy manufacturing to offset property slowdown. This overlaps with key industries prioritized by the US, exacerbating tensions.
Our take
Overcapacity also presents challenges within China. Intense competition in the solar and electric vehicle industries, for instance, is anticipated to drive some producers out of the market. Coordinated policy efforts are warranted to cultivate sustainable development of important new technologies, in our view.
Despite economic critiques, Yellen's visit upheld diplomatic courtesies. Following her meetings, she embarked on a boat cruise with Vice Premier He and stressed the importance of continued high-level dialogue. Later receptions with Premier Li Qiang and Beijing's mayor Yin Yong saw further acknowledgment of the relationship's importance. Yellen also received a private tour of the renowned Forbidden City, and a taste of the spicy Sichuan food under her own request in Beijing.
"It is undeniable that the US-China relationship is on a stronger footing today than this time last year," stated Yellen when she concluded her five-day trip yesterday. Moving forward, both sides agreed more constructive exchanges are warranted to promote "balanced growth." They will initiate new dialogues around money laundering and collaborate on shared global challenges such as climate change and debt vulnerabilities in emerging markets.
Substantive discussions also took place with PBOC Governor Pan Gongsheng and Minister of Finance Lan Fo’an regarding economic trends and avenues for deeper cooperation between their respective institutions. Topics such as international finance, debt management, and strengthening existing working groups were explored. To foster understanding, Yellen participated in roundtable discussions with US business leaders where she listened attentively to business perspectives on operating in China. Yellen also shared her career experiences with students and professors at Peking University while discussing the bilateral economic relationship. Engaging youth was another priority through a newly launched high school exchange initiative. This follows a proposal by President Xi Jinping to welcome 50,000 American students to China over five years, with the goal of fostering amity between the two nations. The first batch of US high school students from Washington DC were in China two weeks ago visiting Shenzhen and Suzhou.
Secretary Yellen's balanced approach of addressing disputes while cultivating understanding illustrates what is required to sustain productive China-US cooperation despite ongoing trade disagreements.
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Nathan Chow 周洪禮
Senior Economist and Strategist - China & Hong Kong 高級經濟學家及策略師 - 中國及香港
[email protected]
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