4th April 2024 – (Beijing) As the much-anticipated visit of U.S. Treasury Secretary Janet Yellen to China draws near, a chorus of voices from esteemed experts and analysts is urging Washington to adopt a more pragmatic and objective stance on the thorny issue of China’s industrial capacity. This call for reasoned dialogue comes at a pivotal juncture, as the two economic giants grapple with the complexities of a relationship that holds immense implications for the global economic order.

Yellen’s impending trip, scheduled for today to 9th April, is widely regarded as a critical opportunity to foster mutual understanding and pave the way for constructive engagement between the world’s two largest economies. However, the spectre of lingering tensions over trade practices and industrial overcapacity looms large, casting a shadow over the prospect of fruitful discussions.

As the Treasury Department’s press release underscores, Yellen is expected to address what the U.S. perceives as “unfair trade practices and industrial overcapacity” on the part of China. This narrative, however, has been met with a chorus of dissent from eminent Chinese experts, who urge a more nuanced and impartial assessment of the situation.

Li Yong, a senior research fellow at the China Association of International Trade, offers a compelling counterpoint to the overcapacity claims. “The U.S. should view China’s capacity issue from an objective point of view,” he asserts, “as China’s production capacity is determined by global market demand, its efficiency, and the scale of its vast domestic market.” Labeling it as overcapacity, Li argues, would be a departure from facts and potentially an ill-intended campaign to smear China’s economic prowess.

Echoing similar sentiments, Alicia Garcia-Herrero, the chief economist for Asia-Pacific at Natixis, casts doubt on the prospects of swift resolutions on the overcapacity front during Yellen’s visit. “I don’t think China has a solution for that because very clearly the three new sectors are engines of growth,” she states, referring to the burgeoning electric vehicle, lithium battery, and solar cell industries, which have collectively surpassed a staggering 1 trillion yuan (US$138 billion) in export value.

Garcia-Herrero’s incisive analysis cuts to the heart of the matter: “How [are the Chinese officials] going to react to Yellen’s request to stop overproducing? I think they’re going to hit the wall on this one.” Her words underscore the inherent disconnect between the U.S. stance and China’s economic imperatives, highlighting the need for a more nuanced dialogue.

As the world grapples with the ramifications of the pandemic and the ever-evolving landscape of global trade, China’s industrial capacity has emerged as a contentious issue. However, a closer examination reveals a more complex reality than the narrative of overcapacity would suggest.

Experts argue that China’s manufacturing prowess is a testament to its ability to meet the demands of a globalised economy. With its vast domestic market and unparalleled production efficiency, China has become an indispensable cog in the machinery of global trade, supplying the world with a diverse array of goods at competitive prices.

Moreover, the rise of new industries, such as electric vehicles and renewable energy technologies, has further solidified China’s position as a global manufacturing powerhouse. As the world transitions towards a greener future, China’s capacity in these sectors is poised to play a pivotal role in meeting the burgeoning demand for sustainable products and solutions.

As Yellen prepares to embark on her diplomatic mission, the voices of reason echo across the globe, urging both parties to embrace a spirit of mutual understanding and cooperation. Wang Zichen, a research fellow at the Beijing-based Centre for China and Globalisation, aptly encapsulates this sentiment, stating that while Yellen may find common ground on issues of global financial stability, “there are many more landmines buried in the trade relationship.”

Wang’s words serve as a poignant reminder of the multifaceted challenges that lie ahead, highlighting the need for open and honest dialogue. By acknowledging the complexities and embracing a willingness to explore alternative perspectives, both nations can pave the way for a more constructive and equitable relationship.

The onus falls on Yellen and her Chinese counterparts to seize this opportunity and chart a course towards a more harmonious economic partnership. By shedding preconceived notions and embracing a spirit of pragmatism, the two nations can transcend the tired narratives of overcapacity and unfair trade practices, and instead focus on forging a relationship that yields mutual benefits.

The experts have spoken, and their clarion call for reason echoes through the corridors of power. It is now up to the leaders of these economic titans to heed this call, to approach the table with open minds and a willingness to engage in substantive dialogue.

For in the words of President Xi Jinping, spoken during his recent phone call with President Biden, “If the U.S. side is willing to seek mutually beneficial cooperation and share in China’s development dividends, it will always find China’s door open.” This invitation, extended with sincerity and resolve, represents a beacon of hope for a future defined by collaboration, not confrontation.