Yellen's China Visit: Clean Energy Trade Talks

During her recent four-day visit to Guangzhou and Beijing, US Treasury Secretary Janet Yellen warned Chinese economic leaders regarding their overinvestment in factory capacity for clean energy goods, calling it unacceptable.

Although she tried to make her Chinese hosts comfortable, Yellen is tasked with the challenge of advising President Joe Biden on potential actions to address this issue, which could include raising tariffs on Chinese electric vehicles, solar panels, and other clean energy products to safeguard US producers and workers.

Yellen's discussions with Chinese Vice Premier He Lifengfocused on the topic of "balanced growth". These include worries such as industrial capacity and weak global demand.

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However, her major complaint regarding China's massive export surge of inexpensive EVs and solar panels, supported by the state, surpassing domestic demand, drew criticism.

China trade experts suggest that alongside the ongoing dialogue, the Biden administration may consider new trade actions, such as a "Section 301" tariff investigation or a complaint filed with the World Trade Organisation.

Former President Donald Trump operated Section 301 to impose tariffs on Chinese imports in 2018, and the Biden administration is currently reviewing whether to renew these duties.

Even with the diplomatic tensions, Yellen's approach during her visit received applause from Chinese officials, academics, and social media users.

Unlike her previous trip to China in July 2023, Yellen took time to engage socially with her hosts and explore cultural sites, including the Forbidden City in Beijing.

Symbolic gestures, such as exchanging gifts with Vice Premier He during a Pearl River boat cruise in Guangzhou, spotlight the bond between the two nations.

However, regardless of the positive gestures, there remain misunderstandings over Yellen's claim about China's overcapacity in green energy manufacturing.

Chinese Commerce Minister Wang Wentao proved false claims of overcapacity, attributing the success of Chinese EV makers to innovation rather than subsidies.

A Chinese government adviser also noted thatovercapacity is a topic for discussion but not easily resolved.

Despite the challenges, Yellen's visit and the changing relationship with Chinese officialsgave her a major stance in the ongoing debate over US tariffs.

Wendy Cutler, a former US trade negotiator, supports Yellen's influence but notes the difficulty of advocating for more dialogue amid rising anti-China sentiment in the United States, particularly during a presidential election year.

(With inputs from Reuters)