Minister Yellen’s response to China’s ‘overproduction’: It destabilizes the global economy

3 mins read
Minister Yellen's response to China's 'overproduction': It destabilizes the global economy

US Treasury Secretary Yellen, who is in China, warned that overcapacity production, which has increased with state-sponsored investments, will lead to imbalances in the global economy.

During her visit to China, US Treasury Secretary Janet Yellen said that the country’s growing overcapacity in emerging sectors such as the production of electric vehicles and renewable energy equipment will create imbalances in the global economy.

At the first stop of her visit, Yellen met with representatives of the American Chamber of Commerce (AmCham) in the city of Guancou, the center of Guangdong province in the south of the country, and emphasized that the US wants to establish a healthy economic relationship with China and does not seek to break economic ties with China.


Pointing out that the US and Chinese economies together account for 40 percent of the global gross product, Yellen said, “The economic relationship between the US and China is the most important bilateral economic relationship in the world. Countries around the world are closely watching not only our economies but also our relationship. This relationship needs to be managed responsibly.”

Yellen reminded that one-third of American firms operating in China in a survey conducted by AmCham stated that they faced unfair treatment compared to their Chinese competitors, and pointed out that barriers to market access for foreign firms and coercive actions against American firms harm the business environment in the country.


Stating that US firms are concerned about the Beijing administration’s adoption of an approach that is increasingly moving away from the market approach, Yellen stated that overcapacity production in some sectors is the primary concern. Yellen pointed out that direct and indirect state support in new areas has led to a production capacity that exceeds domestic demand in China and is more than the global market can handle.

Emphasizing that overcapacity production is not a new problem but has recently intensified, revealing potential risks in new sectors, Yellen said, “Overcapacity production creates large-scale exports at low prices. This will not only cause US firms and workers to lose their jobs, but will also negatively affect companies in countries such as India and Mexico.” Yellen underlined that overcapacity production will also negatively affect the resilience of the global economy by leading to overconcentration of supply chains.

Yellen argued that overcapacity also poses a risk to Chinese industry and companies and could negatively affect China’s productivity and growth. “I think it would be in China’s interest to find solutions to overcapacity and focus on market-based reforms in general. As I’ve said before, China is too big to grow based on exports alone.”


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