The Chinese government’s support for expanding manufacturing in sectors such as solar, electric vehicles and lithium-ion batteries has “growing negative spillovers” on the globe — much like a glut of Chinese steel exports “decimated” industries around the world in the 2010s, Yellen said from the garden of the American ambassador’s official residence.
“I’ve made clear that President Biden and I will not accept that reality again,” she said.
The visit, Yellen’s second in nine months, is part of an effort to stabilize relations after years of spiraling tensions. Secretary of State Antony Blinken is expected to visit China later in the year.
Biden and Chinese leader Xi Jinping spoke by phone last week as both superpowers pushed forward with a tentative reset of a relationship hamstrung by lingering disputes over trade and technology.
China has largely welcomed Yellen, who is seen in Beijing as a pragmatist who opposes the “decoupling” of the world’s two largest economies.
Chinese state media lavished enthusiastic praise on Yellen for her proficiency with chopsticks during meals at state-run restaurants serving regional Chinese cuisine.
But the positive tone has been undercut by rising concerns in Europe and the United States about a surge of cheap Chinese exports — most notably green technologies but also electronic appliances and steel — that could put international competitors out of business.
Analysts have warned of a repeat of the “China shock” that hollowed out American manufacturing in the 2000s if China continues to pump money into manufacturing to spur a slowing economy.
“China is now simply too large for the rest of the world to absorb this enormous capacity,” Yellen said. “… When the global market is flooded by artificially cheap Chinese products, the viability of American and other foreign firms is put into question.”
She added that U.S. concerns are “not animated by anti-China sentiment” and are shared by many other countries around the world, including Japan, Mexico and the Philippines, as well as across Europe.
Beijing appeared to acknowledge the need for efforts to stem rising trade tensions from Chinese overproduction.
After meeting recently with Chinese Vice Premier He Lifeng, Yellen announced an initiative of “intensive exchanges” to address “imbalances” in the global economy stemming from Chinese support of its industries. The talks are set to begin within weeks.
She declined to elaborate on the measures the United States would press China to adopt but said Chinese authorities should boost domestic consumption to balance the current lopsided reliance on manufacturing.
But Beijing has bristled at any suggestion of a solution that harms its emerging dominance in the technologies needed to curb reliance on fossil fuels and the greenhouse gases they emit when burned.
Chinese Premier Li Qiang on Sunday called for the United States to “view issues of industrial capacity objectively” and said China will “contribute significantly to the green and low-carbon transition worldwide.”
China hopes the United States will “uphold the basic norms of fair competition” and not “politicize or impose security concerns on trade,” Li said, according to a Chinese government readout.
China’s ballooning trade relationship with Russia was another point of tension.
The Chinese Foreign Ministry rejected Yellen’s warning that Chinese companies should not support Russia’s military industrial sector as an attempt to “attack and smear normal relations between Russia and China.”
On Chinese social media, however, the discussion continued to focus on Yellen’s food choices, after she was spotted over the weekend at a Beijing restaurant run by the government of Sichuan, a province famous for its dishes laden with numbing pepper.
State media was quick to note that goodwill from embracing Chinese food culture will only get the United States so far.
“We welcome U.S. officials to sample Chinese delicacies,” one state-affiliated commentator wrote. “This does not mean that we accept sanctions and restrictive measures.”
Pei-Lin Wu and Vic Chiang in Taipei, Taiwan, contributed to this report.
