The Minister of Finance said that the USA will not accept Chinese imports that would decimate new industries

Yelen said that US President Joe Biden will not allow a repeat of the "China shock" of the early 2000s, when a flood of Chinese imports destroyed about two million US manufacturing jobs.

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American Finance Minister Janet Yellen at a press conference in Beijing, Photo: Reuters
American Finance Minister Janet Yellen at a press conference in Beijing, Photo: Reuters
Disclaimer: The translations are mostly done through AI translator and might not be 100% accurate.

US Treasury Secretary Janet Yellen has warned China that Washington will not allow new industries to be decimated by Chinese imports, as she wrapped up four days of meetings to insist that Beijing rein in excess industrial capacity, Reuters reports.

Jelen said at a press conference that the US president, Joe Biden, will not allow a repeat of the "China shock" of the early 2000s, when a flood of Chinese imports destroyed about two million American manufacturing jobs.

She, however, did not threaten new tariffs or other trade actions if Beijing continued its massive state support for electric vehicles (EVs), batteries, solar panels and other green energy products.

Jelen used her second trip to China in nine months to complain that Beijing's overinvestment has built up factory capacity that far outstrips domestic demand, while fast-growing exports of these products threaten companies in the US and other countries.

She said the newly created exchange forum, where the issue of excess capacity would be discussed, would take time to come up with a solution.

Jelen drew parallels with the pain felt in the US steel sector in the past.

"We've seen this story before," she told reporters. "More than a decade ago, massive support from the PRC (People's Republic of China) government led to underpriced Chinese steel flooding the global market and decimating industries around the world and in the United States.

Jelen added: "I made it clear that President Biden and I will not accept that reality again."

When the global market is flooded with artificially cheap Chinese products, she said, "the viability of American and other foreign firms is called into question."

Jelen said that her talks with Chinese officials advanced American interests and that US concerns about excess industrial capacity are shared by Washington's European allies, as well as Japan, Mexico, the Philippines and developing markets.

Fighting back

China's vice finance minister, Liao Min, told Chinese media that Beijing had "fully responded" to US questions about overcapacity and expressed "serious concern" about Washington's restrictions on trade and investment.

Liao said China's "current competitive advantages are rooted in China's large-scale market, complete industrial system and abundant human resources," condemning "the escalation of green protectionist measures by some developed economies."

"China will not sit idly by and ignore it," Liao said in comments posted on the ministry's website.

China's parliament, the National People's Congress, announced in March that the government would take steps to crack down on excess industrial capacity.

But Beijing says the recent US and European focus on risks from China's overcapacity is misguided.

Chinese officials say the criticism underestimates the innovation of companies in China and overestimates the importance of state support in driving their growth. They also say that tariffs or other trade restrictions will deprive global consumers of green energy alternatives that are critical to achieving global climate goals.

WTO RULESTrade restricting trade in Chinese electric vehicles would be in violation of World Trade Organization rules, the Ministry of Industry and Information Technology said in a statement carried by state media CCTV and China Daily.

The Chinese ministry added that it is committed to supporting electric vehicle exports and will help "accelerate the overseas development" of the industry, including planning transportation and logistics and supporting firms to innovate and meet global standards.

China's commerce minister, Wang Wentao, made harsher remarks during a roundtable meeting with Chinese electric vehicle manufacturers in Paris, saying US and European claims about China's excess EV capacity are unfounded, Reuters reports.

Instead of subsidies, Chinese electric vehicle companies rely on continuous technological innovation, perfect production and supply chain systems and full market competition, Wang said on his way to discuss the European Union's anti-subsidy investigation.

Jelen suggested that a possible short-term solution would be for China to take steps to strengthen consumer demand with household support and shift its growth model from investment to the supply side.

Jelen discussed the issue extensively with Prime Minister Li Jiang, and also met with Finance Minister Lan Foan on Sunday. Today, she met with the Governor of the People's Bank of China (PBOC), Pan Gongsheng and former Vice Premier Liu He.

Deer with Gongsheng on the day of their meeting
Deer with Gongsheng on the day of their meetingphoto: Reuters

In an interview with CNBC after the meetings, Yelen said she was "not thinking so much" about China's trade restrictions as about changes in its macroeconomic environment. But she reiterated that she would not rule out tariffs as an option.

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