The main themes of Janet Yellen’s visit to China

The Secretary of the Treasury of the United States, Janet Yellenwill travel to China this Thursday to try to reduce tension between the world’s two largest economies, as he did during a visit to the country last year.

It will arrive with a range of issues on the agenda, from the most advanced technologies to the security of supply routes, including overproduction and subsidies to industries.

Chinese overproduction

The issue is important for Washington, given that the slowdown in the Chinese economy could prompt Beijing to boost overproduction to compensate for the drop in activity, especially in the clean energy sector or electric vehicles.

In these two areas, the United States wants to quickly develop production and supply chains that could be weakened by Chinese competition considered, under these conditions, unfair.

Chinese banks have facilitated access to credit for the national industry. They lent almost $700 billion in the third quarter of 2023, according to the Atlantic Council, the most “at below market rates”.

As new battery and electric vehicle factories spring up in China, there are fears the country will flood the global market, “which will have an impact not only in the United States and Europe, but also in many developing countries“he warned Wendy Cutlervice president of Asia Society Policy Institute.

Beijing recognizes the risks associated with overproduction, but does not appear to be taking steps to address them.

Business climate

According to a study by the American Chamber of Commerce in China, a third of companies believe that Chinese authorities treat them less favorably than their local rivals.

It is a problem that affects both market access and the application of regulations.

In the southern city of Guangzhou, Yellen He plans to meet with American companies to talk about the issue.

Last December he urged Beijing to abandon its economic approach based on state involvement, to make the country more attractive to foreign investment.

China is trying to attract investments to revive its economy, but there is a risk of “get fed up with promises“, according to Bill Bishopauthor of the digital newsletter Sinocismand investors hope “more concrete and structural actions, not new promises or nice documents from the authorities”.

National security

This issue resurfaces every time economic ties between China and the United States are discussed.

In February, the president of USAJoe Biden, issued an executive order aimed at protecting Americans’ sensitive personal data from use by several countries, including China.

In August, the Treasury launched a program to closely monitor all US investments made in China in sectors considered sensitive, authorizing the possibility of prohibiting certain transactions.

These are semiconductors and artificial intelligence, for which new regulation is expected.

Chinese Foreign Minister Wang Yi estimates that the US approach to artificial intelligence could lead to mistakes with consequences “historical”.

These national security fears are also behind the desire for ByteDance, TikTok’s Chinese parent company, to sell the social network in the United States.

Competition and “Friendshoring”

Washington’s strategy offriendshoring”, that is, entrusting their supply chains to allies and partners, is another source of tension, because it favors certain origins of products to the detriment of China.

Yellen He recalled that the world is big enough for both countries, an argument that does not convince the Chinese authorities.

China has attempted to respond with retaliatory measures, particularly in the face of the US administration’s efforts to limit its access to the most advanced semiconductors.

For example, Beijing announced controls on exports of critical metals, necessary for the production of these semiconductors, and prohibited the use of chips manufactured by the American company Micron for certain infrastructure projects considered essential.