“We’ve had intensive discussions with the Chinese about this. I think they understand our position, and it is a tool that’s available,” she said.
In December, US President Joe Biden signed an executive order giving the US Treasury authority to sanction foreign banks that facilitate the flow of military goods to Russia.
More recently, Washington was weighing sanctions against Chinese banks to help US Secretary of State Antony Blinken – now visiting China from Wednesday to Friday – persuade Beijing to halt commercial support for Russia’s military production, according to a Wall Street Journal report on Monday.
Blinken’s visit, his second to the country in 12 months, comes as the US and China scale up official contacts to keep their relations from fraying amid their ongoing disputes over issues like trade and Taiwan.
“My responsibility is to emphasise the undesirable spillovers of excessive subsidies to everything in the clean-energy supply chain. And to make sure that that’s heard at the highest level,” she said in Thursday’s interview.
Chinese overcapacity was not just a US issue, Yellen added, describing it as affecting Europe, Japan and emerging markets like India and Mexico.
“We’re not trying to dominate the global market. We have no problem with China producing and selling globally and exporting,” she continued.
“But the United States and Europe and other countries also want to have some involvement in the ability to produce clean-energy products that are going to be of great importance.”
A Xiaomi SU7 sedan on display at one of the company’s stores in Shanghai. China now makes more than 60 per cent of electric cars in operation worldwide. Photo: Bloomberg
In the past decade, China has grown into the biggest player in the global new-energy industrial chain, helped by policy support, heavy government subsidies and the world’s most complete manufacturing infrastructure network.
It now dominates 80 per cent of the global supply chains of photovoltaic products and automotive batteries, while more than 60 per cent of electric cars in operation globally were made in China.
As a result, the country’s perceived monopoly of the sector has evoked some backlash.
The US has largely kept Chinese EVs at bay, thanks to an additional 25 per cent tariff imposed since the administration of former president Donald Trump. In 2022, the Biden administration enacted the Inflation Reduction Act that entails comprehensive subsidies for US domestic new-energy manufacturers.
“This is a problem that developed over many years. It’s not going to be solved in a day or a week,” Yellen said.
“So it’s important that China recognises the concerns and begins to act to address them. But we don’t want our industry wiped out in the meantime, so I wouldn’t want to take anything off the table.”
The treasury secretary noted her thoughts on comparative advantage – a foundational principle in international trade referring to an economy’s ability to produce a particular good or service at a lower opportunity cost than its trading partners – has changed with respect to China, while denying it presaged further protectionism.
“It’s well documented that the United States experienced what’s referred to as a ‘China shock’, which was after China was admitted to the WTO, its exports to the United States utterly surged … And that really ended up with the huge loss of good manufacturing jobs in parts of the country that have really never seen employment recover,” she said.
“I’ve been in favour of free trade. But it has to be something that broadly benefits people throughout the country.”
