Yellen warns from China of the risk of overproduction linked to Beijing subsidies

First modification: 04/05/2024 – 15:28

2 min

With Stéphane Largarde, RFI correspondent in Beijing

Diplomacy is a learning process, and it is often necessary to repeat the same message in the hope that one day it will be heard. This is what Janet Yellen did again this Friday in Guangzhou. She spent an entire day meeting with decision-makers in the vast Guangdong (or Canton) province in southeastern China. The old workshop of the world was not chosen at random: it was there, recalled the US Treasury Secretary, where in 1992 Deng Xiaoping “renewed China's commitment to a policy of reforms and opening to markets.”

Industrial excess capacity

On Friday, as she did nine months ago, Janet Yellen called for “healthy competition” and a “level playing field” between the world's two largest economies. With Chinese industrial overcapacity in the spotlight.

Like the Europeans, the United States is concerned about the excess industrial capacity of the world's second largest economy and the weakness of domestic consumption, which is causing an externalization of demand.

The US Treasury Secretary recently suggested that increasing Chinese exports of electric vehicles, solar power and batteries was a problem at a time when the United States was also investing in reviving its own manufacturing sector. He is expected to raise the issue of Chinese oversupply, particularly in the electric vehicle and solar panel sectors, to his Chinese counterparts.

“New productive forces”

This four-day visit comes after a phone call between the American and Chinese presidents, while Beijing, which awaits the return of foreign investors, invited important American businessmen to the People's Palace at the end of March.

The Chinese media highly appreciates the US Treasury Secretary. On Friday they noted that she “handled chopsticks with ease” at a presumably Cantonese lunch. Speaking to the US Chamber of Commerce in Guangzhou, Janet Yellen reiterated that US policy since Joe Biden took office has not been about decoupling, but about defusing risks through “open and active communication.”

Following the concept of “dual circulation”, which involved emphasizing both the growth of exports and the expansion of domestic demand, Xi Jinping launched the new mantra of “new productive forces” last year, underscoring the need for a new model of economic growth based on technological innovation, in sectors such as sustainable energy vehicles and artificial intelligence in particular.

Although the communist government and the Chinese state media refute Western criticism of Chinese subsidies to these sectors, the authorities are aware of both the problem of sluggish consumption, which is paralyzing the economy, and of overproduction, which is described as a major challenge at an economic work conference in December, notes. “What China exports is advanced production capacity that responds to the needs of foreign customers,” wrote the New China agency cited by the US network.