Apr 2, 2024 - Economy

What’s at stake as Treasury Secretary Janet Yellen visits China

Yellen near China US flags

Treasury Secretary Janet Yellen before a bilateral meeting with top China officials in San Francisco in November 2023. Photo: Justin Sullivan/Getty Images

Treasury Secretary Janet Yellen will travel to China for high-stakes meetings this week — her second trip in less than a year amid ongoing tension between the world's two economic powerhouses.

Why it matters: Yellen plans to press an issue that could further intensify China's strained economic relations with the West: what the U.S. sees as China's overproduction of green technology that the nation could dump on the global market, undermining such industries in the rest of the world.

Context: What was once the globe's fastest-growing economy now faces big threats, with huge uncertainty about how China's policymakers will react to that shift.

  • The Biden administration says China's efforts to boost its factory sector have resulted in a surge of subsidized products — solar panels, electric vehicles and more — that it can offer for cheap, undercutting the White House's industrial policy investments.

Driving the news: President Biden spoke with China's Xi Jinping via phone Tuesday, the first one-on-one conversation since the Chinese leader's visit to the U.S. in November, according to media reports.

  • Among the issues the two discussed: China's relationships with Russia and Iran as turmoil continues in Ukraine and the Middle East.

What to watch: The Treasury Department says Yellen will hold "extended" bilateral meetings with Chinese counterparts, including the nation's economic czar, Vice Premier He Lifeng.

  • Yellen will visit Beijing after a stop in Guangzhou, a key trade and exporting hub that's also home to several foreign firms. There, she will participate in a roundtable about China's economic challenges.

Flashback: Yellen's recent speech at a factory previewed the chief concerns that a senior Treasury official said she will raise with top China officials in the coming days.

  • "I am concerned about global spillovers from the excess capacity that we are seeing in China," Yellen said last week. "China's overcapacity distorts global prices and production patterns and hurts American firms and workers, as well as firms and workers around the world."
  • The fear is that the situation parallels one during the Obama administration. Then, China overproduced steel and aluminum products and exported them at depressed prices — warping those industries globally.

The intrigue: Yellen's trip to China is one of the final opportunities for the Biden administration to influence economic relations between the two nations before November's presidential election.

  • Jitters around China's overcapacity issue come as the U.S. cracks down in other areas, including trade, investment and technology. Lawmakers in Washington are pushing efforts to force China-based ByteDance to sell TikTok — or face a ban in the U.S.
  • Still, a senior Treasury official said the U.S.-China relationship is on firmer footing than it was two years ago, largely because of improved communication channels between the two nations.
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