US Treasury Secretary Janet Yellen is set to caution against the risks posed by excess industrial capacity in China, particularly in industries like electric vehicles (EVs), which could have far-reaching implications globally. In prepared remarks, Yellen emphasizes the importance of addressing this issue during her upcoming visit to China and urges Beijing to take necessary measures to mitigate the potential fallout.
Concerns Over Global Impact
Yellen’s remarks highlight the historical trend of Chinese government support leading to overinvestment and surplus capacity, particularly in sectors such as steel and aluminum. While this strategy may have bolstered domestic production and employment, it has had adverse effects on industries in other countries, forcing them to contract in response to China’s export practices.
Emerging Challenges in New Industries
The Treasury Secretary also raises concerns about the emergence of excess capacity in “new” industries such as solar energy, EVs, and lithium-ion batteries. This trend could further exacerbate global imbalances, distorting prices and production dynamics while posing challenges for companies and workers worldwide.
Call for Fair Competition
Yellen underscores the importance of fostering a level playing field for American firms and workers to compete effectively in the global marketplace. Addressing what many perceive as an unfair business environment in China has been a longstanding issue for US companies, and Yellen’s remarks reiterate the Biden administration’s commitment to advocating for fair competition practices.
Push for Economic Policy Reforms
Yellen’s warnings echo previous calls for Beijing to shift away from a state-driven economic approach, emphasizing the need for policy reforms to promote greater market transparency and competition. As discussions between the US and China continue, the focus on addressing excess capacity underscores the complex dynamics shaping global trade and economic relations.
SOURCE: Ref Image from Business Recorder
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