Janet Yellen, the U.S. Treasury Secretary, recently voiced her disapproval of Beijing’s “coercive” measures targeting American companies during her trip to China. Yellen called on the Chinese regime to provide a “level playing field” for American businesses and workers and address manufacturing overcapacity. This criticism comes as a result of the Chinese regime’s unfair economic practices, including imposing barriers to access for foreign firms and taking coercive actions against American companies.
Yellen’s comments were made during an event hosted by the American Chamber of Commerce in China (AmCham), where she highlighted the findings of AmCham’s annual survey. The survey revealed that a third of U.S. companies felt they were treated unfairly compared to their Chinese competitors, with the technology and research and development (R&D) sector experiencing the largest decline in equality. Yellen emphasized that ending these unfair practices would not only benefit American firms but also improve the business climate in China.
Foreign direct investment in China has also seen a significant decline in recent years, reaching its lowest level in 30 years. Chinese Communist Party (CCP) officials have pledged to offer foreign companies the same treatment as domestic competitors, but the series of raids, fines, arrests, and convictions of staff from international consultancies and due diligence firms have dampened foreign investor sentiment. Additionally, the adoption of amended state secrets laws and increasing scrutiny of data control and espionage have raised concerns among foreign companies operating in China.
Yellen’s primary focus during her trip was to urge Beijing to address industrial overcapacity, which she highlighted as a concern for the United States and other countries due to its potential for global spillovers. China’s current policy focus on electric vehicles, lithium-ion batteries, and photovoltaics has resulted in excess manufacturing capacity in the country. Yellen warned that overcapacity can lead to large volumes of exports at depressed prices, harming workers and businesses in the United States, India, and Mexico. It also poses a risk to global economic resilience by concentrating supply chains.
However, outside observers are skeptical about China’s willingness to address the issue of overcapacity. Steven Mosher, president of the Population Research Institute, noted that the CCP’s industrial overcapacity is a result of years of huge state subsidies in sectors they want to dominate. He believes that tough trade negotiating tactics, including the possibility of increased tariffs, would be necessary to persuade China to change its economic model.
Sun Kuo-hsiang, a professor of international relations, also expressed doubts about the effectiveness of Yellen’s dialogues with Chinese officials. He highlighted the difference in production approaches between Western economies and China, with the latter continuing to produce goods regardless of whether there are orders or not. This approach could result in excess goods being sold overseas at lower prices, potentially escalating trade tensions with the West.
While some experts believe that the United States and Europe may increase their anti-dumping efforts against Beijing, others argue that it is unlikely to escalate into a full-blown trade war. The Biden administration’s approach of restricting critical U.S. technologies while maintaining most commercial ties with China suggests that trade tensions may rise but not reach the level of a trade war.
In conclusion, Janet Yellen’s recent trip to China has highlighted the need for a level playing field for American businesses and workers and the importance of addressing manufacturing overcapacity. The Chinese regime’s unfair economic practices and coercive measures against foreign companies have raised concerns among American firms and dampened foreign investor sentiment. While tackling overcapacity remains a challenge, it is uncertain whether China will be willing to make significant changes to its economic model. The outcome of Yellen’s dialogues with Chinese officials will determine the future of trade relations between the two countries.
