By FATIMA HUSSEIN (Associated Press)
GUANGZHOU, China (AP) — Janet Yellen, the Treasury Secretary, arrived in China on Thursday for a series of meetings in a nation eager to avoid direct conflict with the United States, but the world’s top two economies still seem to be working out the rules for competing with each other.
There are tensions regarding Chinese government support for the production of electric vehicles and solar panels, similar to the U.S. government's increased assistance for those technology sectors. There are also differences in trade, ownership of TikTok, access to computer chips, and national security — all posing a risk to the carefully managed relationship between the two countries.
The 77-year-old Yellen, a well-known economist and former chair of the Federal Reserve, outlined the issues she plans to address with her Chinese counterparts during her five-day visit. Yellen will start her trip in Guangzhou and then travel to Beijing for meetings with financial leaders and state officials. Her schedule includes meetings with Vice Premier He Lifeng, Chinese Central Bank Governor Pan Gongsheng, former Vice Premier Liu He, leaders of American businesses in China, university students, and local leaders.
Yellen, speaking to reporters during a stop in Alaska on Wednesday en route to Asia, described her visit as a “continuation of the dialogue that we have been engaged in and deepening” ever since U.S. President Joe Biden and Chinese President Xi Jinping met in 2022 in Indonesia. She mentioned that it would be her third meeting with China’s vice premier.
Yellen recently accused China of flooding global markets with heavily subsidized green energy products, potentially undermining the subsidies provided by the U.S. to its own renewable energy and EV sector through the Democrats’ Inflation Reduction Act. She mentioned that she plans to reiterate her concerns to Chinese officials regarding the oversupply of cheap solar panels and EVs that hinder other countries' development in those sectors.
“We need to have a level playing field,” Yellen told reporters. “We’re concerned about a massive investment in China in a set of industries that’s resulting in overcapacity.”
Yellen did not dismiss the possibility of taking further action to counter Chinese subsidies in the green energy sectors, adding, “It’s not just the United States but quite a few countries, including Mexico, Europe, Japan, that are feeling the pressure from massive investment, in these industries in China.”
The Treasury secretary’s travels come after Biden and Xi held their first call in five months on Tuesday, in an effort to show a return to regular leader-to-leader discussions between the two powers. The leaders discussed Taiwan, artificial intelligence, and security issues.
The call, described by the White House as “candid and constructive,” was the leaders’ first conversation since their November summit in California, which rekindled collaboration between the two nations’ militaries and enhanced cooperation in combatting the flow of deadly fentanyl and its precursors from China.
However, it seems to be challenging for the two countries to find a balance between competition and hostility.
For example, Xi recently entertained American CEOs in Beijing to attract them to invest in China. Meanwhile, in August, Biden issued an executive order instructing a committee, led by Yellen, to closely oversee U.S. investment in China related to high-tech manufacturing.
Jude Blanchette, a China expert at the Center for Strategic & International Studies, stated that "the Biden administration's efforts over the past year to stabilize the relationship are clearly working, but the main friction points all remain unresolved and will likely challenge the relationship for the foreseeable future."
"For now, a 'managed rivalry' might be the best we can hope for, given the potentially catastrophic consequences of the relationship really going off the rails," he said.
Yellen recently mentioned that China is saturating the market with green energy, which "distorts global prices," and plans to inform her counterparts that Beijing's increased production of solar energy, electric vehicles, and lithium-ion batteries poses risks to productivity and growth in the global economy.
Over two decades ago, China started expanding its presence in the global economy by exporting affordable goods that appealed to U.S. consumers, but this came at the expense of factory jobs in many American towns. Research by economists David Autor, David Dorn, and Gordon Hanson on the so-called "China Shock" resulted in the steady decline of numerous factory towns, and in some instances, contributed to increased political discontent.
Nevertheless, some experts see a benefit in an economic showdown to manufacture environmentally friendly products.
Shang-Jin Wei, a professor of Chinese business at Columbia University, argues that a subsidy war could ultimately benefit consumers in both countries by enabling them to purchase more climate-friendly products, which is a goal of the Biden administration.
"In contrast, a U.S. tariff on EV imports could raise the price of EVs in the U.S. and is therefore counterproductive for the purpose of inducing a green transition."
Yellen's visit will take place from April 4 to 9. It is intended as a follow-up to her trip to China last July, which led to the creation of economic working groups between the finance departments of both nations to ease tensions and strengthen ties.
But this visit coincides with an election year, during which Democrats and Republicans have heightened their criticism of China, citing concerns about Chinese ownership of popular social media app TikTok, the nation's censorship, human rights record, and recent acts of espionage such as hacking and the use of a spy balloon.
Scheherazade S. Rehman, a professor at George Washington University, highlighted that despite it being an election year and the heightened rhetoric, the U.S. and China are in a mutually beneficial trading relationship and ultimately depend on each other.
China is one of the United States' largest trading partners, and economic competition between the two nations has escalated in recent years. Yellen emphasized on Wednesday that the United States does not want to sever ties with China.
China's backing of Russia as it continues its attack on neighboring Ukraine will be discussed during the meetings. While the U.S. and its allies impose sanctions on Russian officials and various sectors of the Russian economy, such as banking, oil production, and manufacturing, trade between China and Russia has grown.
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