Secretary of Treasury Janet Yellen is scheduled to visit China for the second time in April. She will focus on the threat posed by China’s dumping of cheap green energy exports in the United States and around the world. The EU is also concerned about the potential threat to its auto industry and launched its investigation into China’s subsidies for electric vehicles last year.
Yellen’s Visit
On March 27, Ms. Yellen stated that she would raise the issue of overcapacity with her Chinese counterparts. Speaking at the Suniva solar cell factory in Norcross, Georgia, she warned that China’s export strategy seeks to destabilize global supply chains in industries such as solar energy, electric vehicles, and lithium-ion batteries.“China’s overcapacity distorts global prices and production patterns and hurts American firms and workers, as well as firms and workers around the world,” she said. “Challenges for individual firms can lead to concentrated supply chains, negatively impacting global economic resilience.”
Ms. Yellen compared China’s excessive investment in green energy to its previous overinvestment in steel and aluminum industries, stating that China’s overinvestment has resulted in “global spillovers.”
China’s economic development has slowed sharply since the COVID-19 pandemic. Currently, the Chinese Communist Party (CCP) is attempting to stimulate economic growth through the export of electric vehicles, solar panels, and lithium batteries. However, China’s dumping of cheap green energy exports has brought various problems to the international market.
According to data released by the General Administration of Customs of China (GACC) for 2023, the combined exports of electric vehicles, solar panels, and lithium batteries amounted to 10.6 trillion yuan ($1.407 trillion), a year-on-year increase of 29.9 percent.
Among them, China’s lithium battery exports reached a historic high of $65 billion, a 27.8 percent year-on-year increase, with the United States being the largest market. Solar panel exports increased by 38.5 percent year-on-year, with wholesale prices dropping by nearly half.
Li Hengqing, a Chinese economics scholar living in the United States, recently told The Epoch Times that due to China’s non-market operations, there is a serious issue of overcapacity and a large backlog of products in industries subsidized by the government. One of the purposes of China’s so-called “Belt and Road Initiative” is to export domestic excess capacity and backlog products overseas.
Challenging Tesla in the EV Market
On March 29, the Chinese smartphone giant Xiaomi officially launched the SU7 all-electric sedan. The starting price for the Xiaomi SU7 is 215,900 yuan ($29,884), lower than market expectations.Xiaomi Chairman Lei Jun presented multiple data sets at a press conference, claiming that Xiaomi’s SU7 outperforms Tesla’s Model 3. However, the reliability of the data released and the actual performance of the car could not be independently verified.
Xiaomi’s press conference drew attention and became a hot topic on China’s heavily censored social media. The act of openly challenging Tesla with comparative data has been interpreted by public opinion as an aggressive marketing strategy.
Moreover, the sale of EVs at such low prices is also considered to disrupt the international market.
EU’s Concerns
The European non-governmental organization, the European Federation for Transport and Environment (T&E), released a report on March 27 stating that in 2024, Chinese-produced EVs will account for more than 25 percent of the European EV market, an expected increase of 5 percentage points year-on-year.In 2023, Chinese products accounted for 19.5 percent of EVs sold in Europe, with even higher proportions in the markets in France and Spain, reaching nearly one-third.
The report believes that if tariff increases force Chinese manufacturers to pass on the costs to consumers, Chinese-produced mid-sized sedans and SUVs will be more expensive than similar European-produced models, which may ultimately force Chinese car manufacturers to engage in more localized production.
US Trade Report on China
On March 29, U.S. Trade Representative Katherine Tai released the 2024 National Trade Estimate Report on Foreign Trade Barriers, which specifically stated that China has set goals in key industries that can only be achieved through non-market means, seeking to become the global leader in key industry chains.The report pointed out that although the United States and China signed the phase one trade deal in January 2020, the deal did not fundamentally change China’s state-owned and non-market trade system or alleviate its harmful effects on the U.S. economy.
The report said that the Chinese regime provided Chinese companies with a large amount of government subsidies, resources, and regulatory support while restricting imports, foreign-made goods, and foreign service providers from entering the Chinese market.
Furthermore, China’s approach may cause or exacerbate market distortions, leading to serious overcapacity in many target industries and may cause long-term damage to U.S. interests and the interests of U.S. allies and partners.
