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The U.S. Treasury Secretary issues a warning to China regarding its excessive industrial capacity

Janet Yellen meets He Lifeng at the Guangdong Zhudao Guest House (Via Marshal Guetta/Getty Images)

Janet Yellen, the U.S. Treasury Secretary, wrapped up her visit to China by cautioning about the impact of Chinese imports on American industries.

She highlighted President Biden’s commitment to avoid a repeat of the “China shock” from the early 2000s, which led to massive job losses in American manufacturing.

Although no immediate trade actions were proposed, Yellen stressed China’s urgent need to address state support for industries like electric vehicles (EVs), batteries, and solar panels, which could threaten global competitors.

During her visit, Yellen pointed out the issue of overcapacity caused by China’s excessive investments, resulting in a surplus of production beyond domestic demand.

She emphasized the importance of collaborative solutions and mentioned a new exchange forum dedicated to tackling this challenge.

Yellen drew parallels with past challenges faced by the U.S. steel sector, where Chinese government support flooded global markets with cheap steel, harming industries worldwide.

Yellen warns China against the China shock era (Via Tom Moody/Getty Images)

Chinese officials expressed dissatisfaction with perceived trade restrictions and defended their market advantages and innovations.

They argued against tariffs, highlighting the role of green energy in meeting global climate targets and warning of potential WTO rule violations if EV trade restrictions were imposed.

Yellen suggested China shift its growth strategy towards boosting consumer demand and reducing reliance on supply-side investments.

She held extensive discussions with Chinese officials, including Premier Li Qiang and Finance Minister Lan Foan, underscoring the seriousness of the issues discussed.

While emphasizing a focus on broader economic shifts rather than immediate trade actions, Yellen reiterated that tariffs could be considered if necessary.

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