U.S. Treasury officials have threatened to take action if China floods world markets with lower-cost goods in an effort to shore up its stagnating industrial sector.
“The rest of the world is going to respond, and they’re not doing it in a new anti-China way, they’re responding to Chinese policy,” Jay Shambaugh, the department’s under secretary for international affairs, told the Financial Times in an interview.
The purchasing managers’ index (PMI) for January released by China’s statistics bureau suggested rising production but muted demand in the economy’s manufacturing sector, with only large enterprises performing marginally better month-on-month.
The amount Beijing spends on industrial subsidies eclipses that of other major economies. A report published by the Center for Strategic and International Studies think tank put forth a conservative estimate of $248 billion in nominal terms for 2019. The country was estimated to spend over twice as much to support its industries as the United States.
Newsweek reached out to the Chinese foreign ministry with a written request for comment.
U.S. officials and executives are particularly concerned about Chinese electric vehicles and solar panels. China comprises over 80 percent of the world’s manufacturing capacity for solar panels and accounted for more than 60 percent of global EV sales in 2022.
China’s competitive advantage could threaten the viability of these industries in the U.S. The Inflation Reduction Act that President Joe Biden signed into law in 2022 poured over $70 billion into the EV supply chain and over $10 billion into solar production.
Shambaugh led a delegation of five senior Treasury officials to Beijing this month to discuss a range of issues. These included areas of potential cooperation like climate change but also Chinese subsidies that Washington believes add to China’s manufacturing glut and may make dumping lower products a tempting strategy.
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“We are worried that Chinese industrial support policies and macro policies that are more focused on supply rather than thinking about where the demand will come from are both careening towards a situation where overcapacity in China… is going to wind up hitting world markets,” Shambaugh said.
The U.S. is not alone in its concern. Last fall, the European Union announced it was launching an anti-subsidy investigation into surging European imports of Chinese EVs. EU Commission President Ursula von der Leyen said the prices of these vehicles are “kept artificially low” by China’s “huge state subsidies.”
Asked about the EU probe at a press conference on Tuesday, Chinese foreign ministry spokesperson Mao Ning said: “The leapfrog development of China’s auto industry has provided cost-effective products with high quality to the world. Every one in three exported automobiles from China is an electric car, which contributes significantly to the world’s green and low-carbon transition.”
Uncommon Knowledge
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Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
