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US Treasury Secretary Yellen
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SAUL LOEB / AFP
US Treasury Secretary Janet Yellen is critical of China's massive exports around the world. They produce too much of everything, especially clean energy products, and the world cannot absorb it, said the US politician during a visit to the Chinese metropolis of Guangzhou.
China is currently flooding the global market with electric vehicles, batteries, solar cells, semiconductors and other industrial goods. The background is massive overcapacity that has been built up through years of massive government subsidies and which is now encountering weak domestic demand. World market prices for many goods have fallen due to the flood of products from China and are putting producers in other countries under pressure.
In a series of meetings with senior Chinese business officials Friday through Monday, Yellen will try to convey her view that overproduction is unhealthy for China and that there are growing concerns about it in the U.S., Europe, Japan, Mexico and other major economies.
The consequence could be trade restrictions by other countries, said a high-ranking US Treasury Department official. "If there are trade measures worldwide, they are not directed against China, but rather a reaction to its policies," he emphasized at the same time.
Brad Setser, a former US Department of Commerce and Treasury official, expects new tensions between the US and China over China's export boom. Yellen's warnings could be a first step by the Biden administration toward new tariffs or other trade barriers on Chinese electric vehicles, batteries and other goods.
Yellen declined to comment on possible tariffs. But she said the Biden administration is committed to advancing U.S. supply chains for electric vehicles, solar power and other clean energy products through investment tax credits and that it is not ruling out "other options" to protect domestic production.
At the end of 2022, China had a production capacity of 43 million vehicles per year, but factory utilization was only just under 55 percent, according to the China Passenger Car Association. Bill Russo, founder of Shanghai-based consultancy Automobility, estimates that this equates to excess capacity of about 10 million vehicles per year, accounting for about two-thirds of North American automobile production in 2022.
Overcapacity is even greater in the Chinese solar sector. Overproduction there pushed market prices down by 42 percent last year. But major Chinese manufacturers continue to build factories, supported by government subsidies.
At the end of 2023, China had a capacity of 861 gigawatts of solar panels per year, more than double the world's total installed capacity of 390 million gigawatts. An additional 500 to 600 gigawatts per year are expected to come online this year - enough to meet all global demand by 2032, according to energy research firm Wood Mackenzie.
ssu/Reuters