“Direct and indirect government support is currently leading to production capacity that significantly exceeds Chinese domestic demand and what the global market can support,” Yellen told US businesspeople in the southern Chinese city of Guangzhou, where she arrived on Thursday. This is “a risk to global economic resilience” and puts a strain on supply chains.
In China, a number of sectors are subsidized by the government, including solar, electric mobility and batteries, and renewable energy. As domestic demand weakens, the goods are exported in large quantities, which in turn puts pressure on industries in other countries – especially the German automotive industry in addition to the US.
Being concerned about this has nothing to do with an “anti-Chinese policy,” Yellen assured. Instead, it is about mitigating the risks of “global economic upheaval” that could arise if there is no change in Chinese policy. She also wants to work with the Chinese leadership to address the “challenges” that US companies face in China, such as limited market access. An end to these “unfair practices” will ultimately help China’s companies.
Yellen also said in Guangzhou that the US is committed to a “healthy economic relationship” with China. However, this requires “a level playing field” for employees and companies from the USA as well as “open and direct communication in areas where we disagree”.
Yellen also met Vice Prime Minister He Lifeng on Friday. He assured that both sides would try to find “appropriate answers” to the most pressing problems in the economic relations of the two countries. During her visit, which lasted several days, discussions were also on the agenda with Prime Minister Li Qiang, Central Bank Governor Pan Gongsheng and Finance Minister Lan Fo’an.
There are a range of disagreements between China and the US, from trade and chip production to the state of human rights to Beijing’s territorial claims in the South China Sea. Taiwan is also a source of conflict between the two states. Beijing views Taiwan as a breakaway province that should be reunited with the mainland, if necessary by military force. The US rejects forceful integration by China.
