The United States and China have agreed to launch talks on “balanced growth” in their domestic economies as well as globally.
One key issue the talks will address is US concerns about China’s excess manufacturing capacity for electric vehicles (EVs) and other items, Treasury Secretary Janet Yellen said on Saturday in Guangzhou.
China has become a global EV leader thanks in large part to an array of government subsidies. The downside is that the country has too many EV producers that would not be viable under normal market conditions, and the government is under pressure to let some of them fail.
The US-based EV champion Tesla saw its share of the Chinese market decline to 6.7% for the fourth quarter of last year, from 10.5% in the first quarter, according to a Bloomberg analysis of Chinese Passenger Car Association data. One big reason is that Tesla cannot compete on price with Chinese players led by BYD, which is now the top-selling EV maker worldwide.
Some Chinese EV makers, dismayed by price wars both at home and abroad, have reportedly asked the Beijing government to intervene to prevent long-term damage to the industry.
The world’s two largest economies also decided to expand their cooperation against financial crimes, announcing the start of exchanges aimed at clamping down on the laundering of money, she said.
The agreements were reached following two days of talks between Yellen and Chinese Vice Premier He Lifeng in southern China, according to the US Treasury Department.
Yellen reaffirmed the “important foundations” of the US-China economic relationship, which the two sides agreed to in November, including the need to intensify communication and the shared objective of a healthy economic relationship that provides a level playing field, the department said in a press release.
Discussing the talks on balanced growth, Yellen said they would focus on macroeconomic imbalances, citing her particular concerns about the impact of Chinese industrial overcapacity in sectors such as EVs and solar panels as a result of government support.
Criticising China for exporting large quantities of goods at “artificially depressed prices”, Yellen said, “I firmly believe a shift away from policies that drive overcapacity would benefit the American, Chinese and global economies.”
The issue of overcapacity in some Chinese manufacturing sectors has come to light as domestic demand remains sluggish in the country where economic growth is slowing amid a prolonged property sector crisis.
China’s official Xinhua News Agency said on Saturday that He and Yellen had “candid, pragmatic and constructive discussions” on the macroeconomic situations of the two countries and the world. The report confirmed the launch of the two new talks on balanced growth and efforts to counter money laundering.
The Chinese side “expressed grave concern over US economic and trade measures restricting China and responded fully to the issue of production capacity”, Xinhua said without elaborating.
In a commentary on Saturday, Xinhua said Washington has “grown increasingly agitated” over China’s booming green industries and criticised the United States for “rehashing the old ‘overcapacity’ rhetoric and threatening to impose higher tariffs”.
“Suppressing China’s EV-related industries won’t help America grow its own. Only cooperation can,” the news agency said.
In another commentary on Friday, Xinhua also lashed out at Washington’s “double standard” as Western nations have “embraced for centuries” a basic economic principle that surplus products find markets abroad.
“Instead of resorting to fear-mongering and protectionism, Washington should focus on fostering innovation and competitiveness within its own borders,” the commentary said.
Yellen is scheduled to hold talks with Chinese Premier Li Qiang, Finance Minister Lan Foan and People’s Bank of China Governor Pan Gongsheng in Beijing before concluding her six-day visit on Tuesday.