U.S. Treasury Secretary Janet Yellen kicked off a five-day trip to China on a geopolitical tightrope: Affirming economic ties between the two countries while calling out concerns regarding unfair business practices and excess production of cheap goods.
“A full economic separation is neither practical nor desirable,” Yellen said Friday during remarks at an American Chamber of Commerce event in Guangzhou. “President Biden and I firmly reject the idea that the United States should decouple from China.”
But she also voiced “concerns about the business environment in China and the ability of American firms to compete on a level playing field.”
Yellen cited a recent survey by the chamber — the China-based organization representing American companies in the region — that found one-third of American firms in China reported unfair treatment, including “barriers to access for foreign firms and … coercive actions against American companies.”
“I strongly believe that this doesn’t only hurt these American firms; ending these unfair practices would benefit China by improving the business climate here,” Yellen said.
Chinese embassy spokesperson Liu Pengyu told The Hill that the U.S. has adopted measures to “suppress China’s trade and technology development” and is increasingly sanctioning Chinese entities, behaviors he characterized as “non-market and unfair.”
“Just as President Xi said during the phone call with President Biden, if the U.S. side is willing to seek mutually beneficial cooperation and share in China’s development dividends, it will always find China’s door open; but if it is adamant on containing China’s hi-tech development and depriving China of its legitimate right to development, China is not going to sit back and watch,” Pengyu said.
The Treasury secretary also laid out the risk of Chinese manufacturing “overcapacity,” which could push large volumes of goods into the global economy at below-market prices.
“This can undercut the business of American firms and workers, as well as of firms around the world, including in India and Mexico. And it can lead to overconcentration of supply chains, posing a risk to global economic resilience,” Yellen said.
China has been grappling with a slump in domestic demand and economic growth in the wake of the pandemic, which shuttered businesses and locked down millions of workers in the country through 2022, well after other major economies reopened. Beijing has increasingly focused on and subsidized clean energy industries, including the manufacturing of electric vehicles and solar panels.
Officials say China does not have sufficient demand to absorb all the products, which would push them into the global economy and make it harder for the U.S. and its allies to compete.
“Direct and indirect government support is currently leading to production capacity that significantly exceeds China’s domestic demand, as well as what the global market can bear,” Yellen said, warning China is “too large to export its way to rapid growth.”
But Pengyu said China has increased exports as “a result of international division of labor and market demand.”
“Chinese products are popular in the global market because of their innovative features and high quality coming out of fierce competition rather than the so-called ‘low-price dumping’ or ‘unfair business practices,’” Pengyu said.
Updated at 3:17 p.m.