Janet Yellen returns to China as tension lingers over green energy industry

US Treasury Secretary says she will press Beijing officials on 'unfair trading practices'

Janet Yellen attends a press conference after a meeting with Chinese Vice Premier He Lifeng in San Francisco in November last year. Reuters
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US Treasury Secretary Janet Yellen arrived in China for the second time in less than a year on Thursday as tension mounts over China's green energy exports.

During her five-day trip, Ms Yellen is expected to press her Beijing counterparts on what the US has labelled “unfair trading practices” on green exports, which Washington says have global consequences.

In previewing her trip, Ms Yellen said that she and Chinese Vice Premier He Lifeng want to continue trade investment, but Ms Yellen said it “needs to be on a level playing field”.

“In particular, we’re concerned about massive investment in China and a set of industries that’s resulting in overcapacity, and we’re concerned about the spillovers that Chinese subsidies to these industries are having on the US and other countries as well,” she said.

Ms Yellen was referring to China's so-called new three economy, in which Beijing supports industries that produce solar technology, electric vehicles and lithium-ion batteries.

But the White House says this also leads to an overcapacity that distorts global prices, similar to Chinese overcapacity of aluminium. Ms Yellen said Europe, Japan and Mexico are also feeling the pressure from Beijing's investment in green energy.

“That's been a complaint of Chinese exports almost from the start of China becoming a major exporter as part of their overall strategy for gaining greater market share abroad,” said Bruce Dickson, professor of political science and international affairs at George Washington University.

“They intensively produce way more than they can absorb in the domestic economy and the rest of it is available for export.”

China's new three economy is only one point of tension between Beijing and Washington, punitive measures undertaken by the US in recent months have added to this.

Among these include Congress passing a law that could ban TikTok in the US unless China divests its ownership stake in the app, Washington strengthening its export controls on semiconductors, and an investigation into Chinese-made electric vehicles over spyware concerns.

“China is very unhappy with these restrictions on its exports into the US [and] the growing difficulty of having Chinese companies listed on the stock exchange” as well as Chinese people and businesses buying US real estate, Mr Dickson said.

“It's also a tit-for-tat issue between the US and China that we simply duplicate what the other country does,” he added, drawing a comparison to China banning Teslas in some cities because the US raised concerns about potential spyware in Chinese products.

There currently are no Chinese-made cars being sold in the US, but Tesla and other American manufacturers still face competition from EV makers like BYD and others.

“The larger concern is … they're well made, they're low cost. And for consumers, that's what you're looking for. But it also means that it will crowd out the ability of American car companies to also compete actively in that portion of the market,” Mr Dickson said.

Complex and at times fraught relationship

The two economic superpowers have a complicated bilateral relationship.

They collaborate in several major areas including climate change and debt distress faced by developing nations face.

But they have also been locked in a trade war since former Donald Trump's administration, with each undertaking numerous punitive actions against the other's economy.

Relations declined during the first two years of President Joe Biden's administration after former House speaker Nancy Pelosi's visit to Taiwan and what was believed to be a Chinese spy balloon was shot down in the US.

Since Ms Pelosi's visit, the US and China have established economic and financial groups that have met three times, and Mr Biden held talks with Chinese President Xi Jinping in California last autumn.

“President Biden charged me with attempting to stabilise our economic relationship, to deepen our communication, and we’ve been doing that over the last year, year and a half,” Ms Yellen said.

Ms Yellen said Mr Biden's phone call with Mr Xi on Tuesday was part of a broader effort by both countries to maintain steady communication with clarity.

“We went for too long with too little communication, and misunderstandings developed,” she said.

Secretary of State Antony Blinken is also due to return to Beijing later this month.

During her trip, Ms Yellen will attend an event with representatives of the US business community in China and hold bilateral meetings with Vice Premier He Lifeng, Premier Li Qiang and People’s Bank of China Governor Pan Gongsheng.

While tension has thawed since her previous visit, observers are not expecting a breakthrough in relations.

“It is not quite as bad as it was then, but it's still pretty bad,” Mr Dickson said.

“And I think leaders in both countries don't really expect a dramatic change, dramatic improvement, because … the leaders' agendas in both countries is so different.”

Updated: April 04, 2024, 12:30 PM