Economy: Chinese subsidies to industry alarm the USA.

During her visit to China, United States Treasury Secretary Janet Yellen sounded the alarm about the massive subsidies Beijing provides to its industry. These subsidies could destabilize the global economy by leading to overcapacity in production.

The American Concerns About Chinese Subsidies

Janet Yellen, who has been in China for four days, expressed her concerns about the consequences of significant Chinese subsidies on the world economy.

“Direct and indirect government aid leads to production capacity far exceeding domestic demand and what the global market can bear,” she stated.

This situation risks leading to an overabundance of goods and flooding the international markets, thus threatening the viability of American and foreign companies. “Overcapacities can lead to significant volumes of exports at low prices and an excessive concentration of supply chains, jeopardizing the resilience of the global economy,” highlighted Ms. Yellen.

Janet Yellen’s concerns echo the worries of the Biden administration regarding Chinese ambitions in key sectors such as electric vehicles and green energies. The American president wishes to stimulate domestic production in these areas, making it a campaign argument for his reelection in November.

According to Paul Triolo, an expert on China at Albright Stonebridge Group, the Biden administration could take preventative measures to avoid future issues related to Chinese overcapacity. However, such an initiative risks provoking a negative reaction from Beijing.

Toward a Resumption of Sino-American Dialogue?

Despite recent tensions between the two powers, China and the United States seem willing to resume dialogue. The visit by Janet Yellen to China, her second in less than a year, bears witness to this intention.

The Treasury Secretary is expected to meet several high-level Chinese officials, including Vice Premier He Lifeng and the governor of the central bank Pan Gongsheng. These talks will thus address sensitive issues such as American restrictions against China and Beijing’s economic support to Moscow.

In conclusion, Chinese subsidies to industry represent a significant challenge for the global economy. To preserve the competitiveness of their companies and the stability of the international markets, the United States will need to find a balance between firmness and constructive dialogue with Beijing. However, as long as China continues its practices of massive subsidies, the specter of an economic war will loom over Sino-American relations.