Trade expert: US looking to 'keep Chinese goods out'

US Treasury Secretary Janet Yellen's recent statement on trade with China was overly broad and protectionist, according to trade experts.

"The US is doing what it can and using arguments that it can marshal … (to) keep Chinese goods out of its market," Sourabh Gupta, a senior fellow at the Washington-based Institute for China-American Studies, told China Daily.

"And that is protectionist, purely," he said.

In her remarks at the Economic Club of New York last Thursday, Yellen blamed China's "over-concentrated supply chain" for posing a threat to US jobs and recent investments aimed at building America's green energy sector.

She also said China's pursuit of its trade policies "may interfere significantly with our efforts to build a healthy economic relationship".

Gupta said that Yellen may be asserting that China's high production capacity, high savings rate and low consumption ratio are putting pressure on international markets.

"But what economists would also say reciprocally is that the US runs a huge budget deficit and … that it is overconsuming at its end," Gupta said. "And therefore, the United States kind of sucks in imports from overseas because it doesn't employ or have a balanced budget. And therefore, there's excess consumption on its end."

Yellen has more than once said that China's electric vehicles and other green industries have "overcapacity" that threatens the global supply chain. China has countered that the US is essentially using the "overcapacity" narrative to "kneecap" other countries' strong industries, practice protectionism and "trample" on market principles and international trade rules in the name of "fair competition".

Gupta said most subsidies provided by the Chinese government on EVs are consumer subsidies, and "that is WTO legal".

And it is "perfectly fine to subsidize" infrastructure such as charging stations because "the market would not do it on its own".

Gupta said government subsidies are not uncommon for companies.

"They didn't just spring up one day. Governments gave them subsidies — even things like the United States chip industry in the 1960s," he said.

"But now the Chinese government is letting that (EV) industry run mostly on market force lines. And so, China has nothing to hide in this regard."

Gupta described the US as "a completely protectionist and noncompliant client on trade issues", which, he said, was "the real opposition" to Yellen's assertion of macroeconomic imbalances hurting the US-China trade.

He said that the US would prefer China to remain downstream of the value chain, but it is not for Washington to make that call.

"That is for China to make its own decisions, and for the market to make its own decisions," he said. "China is moving far up the value-added ladder very quickly in sophisticated export goods. And the important thing that the US needs to do is try to come back into WTO-compliant ways in which it deals with China."

The day after Yellen's speech, the World Bank released its Global Economic Outlook, in which it raised China's GDP growth forecast from 4.5 percent to 4.8 percent in 2024.

Gary Hufbauer, a nonresident senior fellow at the Washington-based Peterson Institute of International Economics, said that Yellen's statement targeting China is "too broad" to "lead to a constructive outcome".

Hufbauer said that the US has the right to criticize specific trade policies, but it "cannot dictate the shape of China's industrial development".

"Good Chinese growth should attract more investment from Europe, Japan and Korea, but not from the US under current geopolitical circumstances. Moreover, if the US puts barriers on capital flows, that will discourage investment into China from all sources," said Hufbauer.

Jake Sullivan, US national security adviser, is one of the main designers of the US science and technology defense strategy against China, known as the "small yard and high fence".

In an April speech, Sullivan said that US policy is to "de-risk" rather than "decouple" from China, which was called out by the Chinese side as rhetoric without substance.

"Unfortunately, there are no boundaries on Sullivan's 'small yard, high fence' policy. 'De-risking' may become more like 'decoupling,'" Hufbauer said. "Much will depend on the outcome of the November presidential election."

Gupta said, "I think the simplest way to understand this is by understanding that the US wants to decouple from China in certain sectors and doesn't want to decouple in the other sectors."

He said that substantial capital would flood into other industrial sectors, except in areas such as semiconductors, AI or quantum computing, where the US and perhaps even Western countries want to exclude foreign capital from entering China.

"The Chinese economy is huge, trillions upon trillions. And there's a lot of space for foreign investment to come in and earn rewards in the Chinese market," said Gupta. "Therefore, a lot of money will also come in now and continue to come in for the long term."