US, Europe must respond in ‘united way’ to Chinese overcapacity: Yellen

The subject “will be a focus at the G7 meetings in Italy later this week”, she added.

In remarks on the importance of the US-European alliance in Frankfurt, Yellen said China’s excess industrial capacity threatened both American and European firms as well as the industrial development of emerging market countries.

“China’s industrial policy may seem remote as we sit here in this room, but if we do not respond strategically and in a united way, the viability of businesses in both our countries and around the world could be at risk,” she said.

Finance ministers from the Group of Seven industrialised nations are due to meet in Stresa, Italy, starting on Thursday.

Washington is concerned that Chinese government support is leading to more production capacity than global markets can absorb, driving cheap exports and stifling growth elsewhere.

Yellen said her concerns had been “communicated directly to my Chinese counterparts”, during a visit to the country last month.

The treasury secretary and US President Joe Biden would take action to protect workers and companies from “being undercut by unfair Chinese economic competition”, Yellen said.

“We want to see healthy green technology sectors, from innovative start-ups to green manufacturing factories in the United States, Europe and around the world, not just in China,” she said.

Her comments come a week after the Biden administration announced steep new tariffs on Chinese electric vehicles (EVs), solar products, semiconductors, battery parts, steel and other strategic industries.

Yellen, who received an honorary degree from the Frankfurt School of Finance and Management, said the European Union and other countries were taking similar actions to use their own authorities to investigate potential trade remedies for Chinese EVs and other products.

Beijing has reacted angrily to the US and European Union actions, warning that the move risk souring economic cooperation with China.

Yellen also called for Europe and the US to stand together against Russian aggression and Iranian “support for terrorism”, including agreeing on a way to unlock the value of some US$300 billion worth of frozen Russian sovereign assets to aid Ukraine.

“That’s why I believe it’s vital and urgent that we collectively find a way forward to unlock the value of Russian sovereign assets immobilised in our jurisdictions for the benefit of Ukraine,” Yellen said.

“This will be a key topic of conversation during G7 meetings this week.”