Janet Yellen in China: 'difficult conversations' and an overcapacity spat put hopes for common ground in question - South China Morning Post

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“I’ve made clear that President Biden and I will not accept that reality again,” she said during a news conference at the US ambassador’s residence on Monday afternoon in Beijing. However, she also made a point of reiterating Washington’s position that it was not looking to “decouple” from China.

“Some changes in policies on the Chinese side are necessary and appropriate,” she said, adding that America’s allies share similar concerns that the situation could lead to “global spillovers”.

As Yellen slams China’s EV overcapacity, minister calls such claims ‘groundless’

But despite Beijing’s past warnings about the risks of overcapacity in some sectors and the potential drag it could have on the nation’s economic recovery, as leadership highlighted during a key economic conference in December, high-ranking officials pushed back against Yellen’s overcapacity allegations during her trip.

While Yellen was in China sharing the West’s concerns, Minister of Commerce Wang Wentao was in Paris, telling Chinese manufacturers of electric vehicles and lithium batteries that “accusations from the US and EU about China’s overcapacity are groundless”.

And Premier Li Qiang urged Washington to not politicise economic issues and to “look at the capacity issue objectively”, after his meeting with Yellen on Sunday, according to party mouthpiece Xinhua.

Wang added that Chinese companies were competitive due to their innovation and strong supply-chain networks, not because of government subsidies. Last year, the European Union launched an anti-subsidy probe into China’s electric vehicles.

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US Treasury chief Janet Yellen in China aiming to further stabilise bilateral trade ties

US Treasury chief Janet Yellen in China aiming to further stabilise bilateral trade ties

Yellen said the overcapacity issue would continue to be discussed “as early as next week”, when the new rounds of economic and financial working groups commence. The mechanisms were established in July during her last trip to China, and three rounds of meetings have taken place. Meanwhile, Yellen said she had asked her team to kick off meetings under the new “Joint Treasury-PBOC Cooperation and Exchange on Anti-Money-Laundering” platform “very soon”.

Yellen’s words came during the first high-level visit by a US official to China this year, and they underpinned Washington’s narrative of finding cooperation despite the wide-ranging competition that persists in areas ranging from trade to science and technological developments.

Yellen said she had spent two hours with Vice-Premier He Lifeng explaining America’s concerns on the overcapacity issue, and she said it was “critical” for China to understand that it would have “adverse impacts” on American workers and firms. However, she did not offer specific details on what measures might be taken if China is eventually deemed to have not addressed the problem.

Apart from their divisions on overcapacity, Yellen also noted that she had “difficult conversations about national security” with her Chinese counterparts, and she called for “transparency” from China on its national security actions and “greater clarity on where it sees the line between national security and economic issues”.

‘The magic of China’: still lots for foreign firms, top business leader says

She added that these types of concessions would provide “greater stability” to the relationship while also helping bolster confidence for firms investing in China.

Yellen, who landed in China on Thursday, described her packed series of high-level meetings in China as “productive, direct and extensive”.

She first met Vice-Premier He Lifeng and American business executives in Guangzhou, Guangdong province, on Friday and Saturday before arriving in the capital city on Saturday afternoon.

In Beijing, she met Premier Li, PBOC governor Pan Gongsheng, Minister of Finance Lan Fo’an and Beijing mayor Yin Yong. She also visited the National School of Development at Peking University, where she had discussions with teachers and students on Sunday.

No one would be naive enough to believe that China-US ties will be closer

Lu Xiang, Chinese Academy of Social Sciences

Lu Xiang, a senior researcher with the Chinese Academy of Social Sciences, said Yellen’s concerns about China’s green tech industries suggest that further economic coercion could occur in related areas.

“[The visit] means that there is hope for stabilising bilateral relations, but no one would be naive enough to believe that China-US ties will be closer,” Lu said.

Jean-Pierre Cabestan, professor emeritus with the Department of Government and International Studies at Hong Kong Baptist University, said the new anti-money-laundering initiative was meant to show “some kind of deliverables to the media and to the public” from Yellen’s visit, and was an attempt to “lower the temperature” in bilateral relations.

Yet, Alicia Garcia-Herrero, chief economist for the Asia-Pacific region at French investment bank Natixis, said the two sides may have agreed to work together to combat money laundering because the US was “putting pressure” on China with regard to related cases from Hong Kong.

Garcia-Herrero expects high-level China-US official visits to continue before Biden goes into “full re-election mode” around midyear.

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Janet Yellen in China: 'difficult conversations' and an overcapacity spat put hopes for common ground in question - South China Morning Post
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