Yellen told a press conference on Monday that US President Joe Biden would not allow a repeat of the "China shock" of the early 2000s when a flood of Chinese imports destroyed about two million American manufacturing jobs.
But she declined to threaten new tariffs or other trade actions should Beijing continue its massive state support for electric vehicles, batteries, solar panels and other green energy goods.
PBOC Governor Pan and I discussed our shared work to close off avenues through which criminals can funnel money toward illicit activities. The newly established Joint Treasury-PBOC Cooperation and Exchange on Anti-Money Laundering will strengthen our collaboration on this issue. — Secretary Janet Yellen (@SecYellen) pic.twitter.com/0ZzMYKTIqLApril 8, 2024
Yellen used her second trip to China in nine months to complain that China's overinvestment has built factory capacity far exceeding domestic demand, while fast-growing exports of these products threaten firms in the US and other countries.
She said a newly created exchange forum to discuss the excess capacity issue intensively would need time to reach solutions.
Yellen drew parallels to the pain felt in the US steel sector in the past.
"We've seen this story before," she told reporters.
"Over a decade ago, massive PRC government support led to below-cost Chinese steel that flooded the global market and decimated industries across the world and in the United States.
"I've made it clear that President Biden and I will not accept that reality again."
When the global market is flooded with artificially cheap Chinese products, she said, "the viability of American and other foreign firms is put into question".
Yellen added that her exchanges with Chinese officials had advanced American interests and that US concerns over excess industrial capacity were shared by allies in Europe, Japan, Mexico, Philippines and other emerging markets.
Janet Yellen (centre) says her exchanges with Chinese officials have advanced American interests. (AP PHOTO)
She said a possible short-term solution was for China to take steps to bolster consumer demand with support for households and retirement, and shift its growth model away from supply-side investments.
Yellen spoke about the issue at length with Premier Li Qiang and also met Finance Minister Lan Foan on Sunday.
She met People's Bank of China (PBOC) governor Pan Gongsheng and former vice premier Liu He on Monday.
China's parliament, the National People's Congress, said in March the government would take steps to curb industrial overcapacity.
But Beijing argues the recent focus by the US and Europe on the risks to other economies from China's excess capacity is misguided.
Chinese officials say the criticism understates innovation by their companies in key industries and overstates the importance of state support in driving their growth.
They also say tariffs or other trade curbs will deprive global consumers of green energy alternatives key to meeting global climate goals.
State news agency Xinhua quoted Li as saying the US should "refrain from turning economic and trade issues into political or security issues" and view the topic of production capacity from a "market-oriented and global perspective".
Chinese Commerce Minister Wang Wentao voiced more pointed objections during a roundtable meeting with Chinese EV makers in Paris, saying US and European assertions of Chinese excess EV capacity were groundless.
