US, China agree to hold talks on 'balanced economic growth'

The United States and China have agreed to hold "intensive exchanges on balanced growth", the US Treasury Department said in a statement, after two days of talks between Treasury Secretary Janet Yellen and her Chinese counterpart He Lifeng in Guangzhou.

The planned talks mark the latest step forward in joint efforts to stabilise rocky ties between the world's two leading economies since presidents Joe Biden and Xi Jinping met last November.

The exchanges "will facilitate a discussion around macroeconomic imbalances, including their connection to overcapacity, and I intend to use the opportunity to advocate for a level playing field for American workers and firms," Yellen said in a statement released on Friday at the conclusion of the talks.

Yellen's visit to China—her second in the past year—comes as Washington and Beijing feud over everything from access to advanced technology to the self-ruled island of Taiwan and the video app TikTok.

Her top priority was also to persuade Chinese officials to rein in excess production capacity for electric vehicles, solar panels and other clean energy technologies that threaten competing firms in the US and other countries.

She said that the forum would provide a "structured" way to discuss a complicated issue, but that it would take some time to resolve.

"I think they have heard that this is an important issue to us. It's going to be critical to our bilateral relationship going forward and to China's relationship with other countries that are important."

She added Chinese officials were "more confident" about the economy after putting in place policies to address issues in the property sector and on local government debt.

The discussions on economic relations and global challenges between He and Yellen were "candid, pragmatic and constructive," Xinhua said in a statement, confirming both parties had agreed to further discuss balanced growth and financial stability.

Beijing also expressed serious concerns about US economic and trade restrictions on China and fully responded to the production capacity issue during the talks, it added.

Yellen also warned Chinese firms faced "significant consequences" if they provided material support to Russia's war effort. The Chinese side emphasised that their policy was not to provide such support and did not want this to be a bilateral issue, she said.

Protectionist pretext

Xinhua criticised Yellen's remarks late on Friday, saying that talking up "Chinese overcapacity" in the clean energy sector created a pretext for protectionist policies to shield US companies.

"After all, it is now known by the world that Washington will not hesitate to show its protectionist teeth under the guise of national security in areas where its supremacy is challenged," the state news agency said.

Some trade experts see increased US criticism of China's production-focused, subsidy- and debt-driven economic model as a step towards raising US tariffs on Chinese EVs and clean energy goods.

Yellen has shied away from raising new trade threats but said during her journey to Guangzhou she would not rule out more actions to protect a fledgling American supply chain for EVs, batteries, solar power and other goods from cut-price Chinese imports.

While Treasury does not expect a major shift in Chinese policy after Yellen's visit, US officials believe it was important to explain the economic risks that overinvestment in some sectors and weak consumer demand present to China and its trading partners.

Yellen said on Friday her trip was partly aimed at cementing US-China ties to "withstand shocks and challenging circumstances."