Trade: Yellen warns of China's excess capacity for the global market

US Treasury Secretary Janet Yellen has warned that China's overcapacity poses a threat to the resilience of the global economy.

Trade: Yellen warns of China's excess capacity for the global market

US Treasury Secretary Janet Yellen has warned that China's overcapacity poses a threat to the resilience of the global economy. "In particular, direct and indirect support from the government is leading to production capacity that significantly exceeds domestic demand in China and what the global market can support," the 77-year-old told representatives of the US Chamber of Commerce in Guangzhou, southern China.

China is flooding the global market with products such as solar panels and batteries. This is also causing concern for some sectors of the economy in Germany, as companies cannot compete with cheap products from the Far East.

While China's development goals may be behind this policy, according to Yellen, overcapacity can lead to high exports and depressed prices, undermining the business of companies in the US and around the world. “And that can lead to excessive concentration of the supply chain, posing a risk to the resilience of the global economy,” she said.

Conditions for foreign companies in China are difficult

The US minister is in China until next Tuesday for talks with high government officials. Before departure, Yellen told the Wall Street Journal that the USA did not want to become too dependent and that China wanted to dominate the market. “We won’t allow that,” she said. In Guangzhou and from Saturday in Beijing, she says she wants to advocate for a healthy relationship between the world's largest and second-largest economies and raise Washington's concerns.

US companies, like European and German companies, have been complaining about similar problems in China for years. A problem in the eyes of companies is the more difficult market access in the People's Republic and unfair treatment compared to domestic and state-owned companies - for example in public tenders. Observers suspect that Yellen is likely to warn China not to use exports to support its weakening economy, but instead to strengthen the domestic consumer market.

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