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Janet Yellen has kicked off her second visit to China as US treasury secretary with a warning of the risk to jobs and businesses posed by overproduction of certain goods in the world’s second largest economy.
On Friday, her first full day of meetings in the southern megacity of Guangzhou, Yellen said she would address the oversupply of Chinese goods in key industries, such as electric vehicles (EVs) and solar panels.
The issue has quickly emerged as a major area of contention globally and in the run-up to November’s US presidential election.
“Overcapacity isn’t a new problem, but it has intensified, and we’re seeing emerging risks in new sectors,” Yellen told a group of China-based American executives. “This can undercut the business of American firms and workers, as well as of firms around the world, including in India and Mexico.”
She first mentioned the issue at an earlier meeting with the leaders of Guangdong province, the country’s economic powerhouse.
US officials and lawmakers have expressed concern that China’s overinvestment and excess capacity could result in cheap products flooding global markets, affecting local industries and employment.
Asked by reporters on Wednesday whether she would consider trade barriers if China doesn’t heed warnings on overcapacity, Yellen said she “wouldn’t want to rule [it] out,” though she wasn’t planning any immediate measures.
Last month, on a visit to a solar panel factory in Georgia, Yellen said China’s excess capacity was distorting prices and production patterns and hurting American firms and workers. She added that China was following its old practice of flooding the global markets with cheap, state-subsidized steel and aluminum.
This photo shows an aerial view of shipping containers stacked at the Lianyungang Port in Lianyungang, in eastern China’s Jiangsu province on March 26, 2024. STR/AFP/Getty Images
She also hinted on that trip that the surge in China’s exports of EVs, solar panels, and batteries was creating a problem at a time when the United States has invested heavily in reviving its own manufacturing sector.
For its part, Beijing is aware of the country’s overcapacity problem, having acknowledged it as a key challenge at an annual economic work conference in December.
But last month, several Chinese state-owned media outlets published editorials challenging the notion that China’s supply glut poses a threat to other economies. “What China exports is advanced production capacity that meets the needs of foreign customers,” the Xinhua news agency wrote.