US and China Plan Talks on Economic Growth Including Manufacturing ‘Overcapacity' Issue, Yellen Says

The US and China agreed to hold talks that will address a key American complaint about China’s economic model, Treasury Secretary Janet Yellen said on the second day of an official visit to China. The two sides will hold more talks and create two new economic groups dedicated to growth in domestic and global economies as well as anti-money laundering, according to a US statement about the creation of the groups.

Yellen, who started her five-day visit in one of China’s major industrial and export hubs, has focused thus far on what the US considers to be unfair Chinese trade practices in talks with senior Chinese officials.

In her statement, Yellen said she and her counterparts “agreed that the US and China will hold intensive exchanges on balanced growth in the domestic and global economies. These exchanges will facilitate a discussion around macroeconomic imbalances, including their connection to overcapacity, and I intend to use this opportunity to advocate for a level playing field for American workers and firms.” The announcement of the groups comes after two days of extended meetings between Yellen and Vice Premier He Lifeng on Friday and Saturday.

Yellen said “these exchanges on balanced growth in the domestic and global economies are key to allowing us to deepen our understanding of China’s policies and continue to express our concerns, as I have done in my meetings with Vice Premier He.

Earlier state media coverage of her trip had dismissed U.S. concerns about overcapacity as a pretext for tariffs. The official Xinhua News Agency wrote Friday night that while Yellen’s trip is “a good sign” that the world’s two largest economies are maintaining communication, “talking up Chinese overcapacity’ in the clean energy sector also smacks of creating a pretext for rolling out more protectionist policies to shield U.S. companies.” Yellen told reporters during an Alaska refueling stop en route to China that the U.S. “won’t rule out” tariffs to respond to China’s heavily subsidized manufacturing of green energy products.

Chinese government subsidies and other policy support have encouraged solar panel and EV makers in China to invest in factories, building far more production capacity than the domestic market can absorb.

The massive scale of production has driven down costs and ignited price wars for green technologies, a boon for consumers and efforts to reduce global dependence on fossil fuels. But Western governments fear that that capacity will flood their markets with low-priced exports, threatening American and European jobs.

The U.S. has made efforts through legislation and executive orders to wean itself off certain Chinese technologies in order to build out its domestic manufacturing capabilities. Many members of the White House and Congress view the actions as important to maintaining national security.

The $280 billion CHIPS and Science Act passed in 2022 to boost the semiconductor industry and scientific research in a bid to create more high-tech jobs in the United States and help it better compete with China. Additionally, last August, U.S. President Joe Biden signed an executive order to block and regulate high-tech U.S.-based investments going toward China.

Yellen moves onto Beijing on Saturday afternoon for more meetings over the weekend with senior officials, economists and the nation’s central bank governor.