Treasury Secretary Says Chinese Overcapacity Has Intensified
Treasury Secretary Janet Yellen, during a visit to China to meet with U.S. businesses that produce there and with Vice Premier He Lifeng, said that China and the U.S. disagree on Chinese policy to grow its economy through exports.
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She said she would bring up the issue of China’s industrial overcapacity, which the U.S. and other countries are concerned can cause global spillovers.
"Overcapacity isn’t a new problem, but it has intensified, and we’re seeing emerging risks in new sectors," she said.
"Specifically, 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. I understand these policies may be driven by domestic development objectives. But overcapacity can lead to large volumes of exports at depressed 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. This will be a key topic in discussions with counterparts in the coming days."
She said that overcapacity also challenges Chinese firms' profitability and productivity.