U.S. Treasury Secretary Janet Yellen is on a five-day visit to China

Transcript

LEILA FADEL, HOST:

U.S. Treasury Secretary Janet Yellen is finishing a trip to China, where she's managed to become a favorite on Chinese social media. Posts with the secretary masterfully using chopsticks have been viewed millions of times there. But has the secretary's popularity online translated to success for the actual purpose of her trip, trade talks? For more on Yellen's visit and relations between the world's two largest economies, we're joined by Mary Lovely. She's a senior fellow with the Peterson Institute for International Economics. Good morning, Mary.

MARY LOVELY: Good morning.

FADEL: Thanks for being on the program. So there are a lot of competing U.S. and Chinese interests over goods like electric vehicles, solar panels, as well as national security concerns related to the economy. So I want to start with listening to what Yellen said to the Chinese premier, Li Qiang, yesterday.

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JANET YELLEN: I believe that, over the past year, we've put our bilateral relationship on a more stable footing.

FADEL: Mary, does that strike you as true, and does Yellen's trip further destabilize the relationship?

LOVELY: Well, that's an interesting question. I believe it is true that the U.S. and China talking at the highest levels of government is extremely important to not just stabilizing the relationship, but trying to reduce conflict, so I think it's important. It doesn't mean that many problems have been solved. It's an attempt by both sides to begin to solve some problems, I think. And has her trip destabilized it? No, I don't see that it has.

FADEL: Were there any breakthroughs with this trip?

LOVELY: Well, I think the mission is - was not so much to have a breakthrough as to warn the Chinese. It seems as though the Biden administration is teeing up more trade restrictions against China. And in particular, we're talking about so-called new energy products - EVs, solar panels, batteries. And there might have been some attempt to, you know, negotiate with the Chinese to get them to restrain, in some way, their exports, but it doesn't seem like anything like that has happened. So it can be seen as an attempt by the administration to avoid tariffs and settle this in a different way.

FADEL: Now, Yellen went to China with a big message, which is that China is overproducing and flooding the market with cheap products, as the administration puts it, and that hurts local production here. How was that message received on her trip?

LOVELY: Well, China has admitted that it has a problem with overcapacity, certainly in the past on steel and cement. And more recently, it was discussed at the work program last December. So at the highest levels of the Chinese Communist Party, they have admitted that there are - overcapacity.

I think where the Chinese and the U.S. most clearly disagree is in electric vehicles. China has become a strong exporter of those vehicles, as is - Europe. The U.S. is far behind, exporting about a tenth of what China and the United - and Europe export each month. But these EVs are, in some sense, a threat to the future. So as the Biden administration and the United States in general has invested in transitioning its auto sector toward EVs, it's important that those, you know, green shoots have a chance to take off.

And there's a fear that Chinese companies lack the basic profit-based motive of when they build too much, inventory builds up, they pull back production. Instead, as we've seen in other industries in the past, China keeps pumping out more product.

FADEL: Really quickly, before I let you go, Yellen's making this visit right before a presidential election, meaning they - China might not be see - dealing with the same man soon or could be dealing with the same man. Does that affect her trip?

LOVELY: Yes, I think it does. I think the Chinese don't really know, if they cut a deal, if it will hold. President Trump has certainly argued for much more draconian restrictions against China.

FADEL: That's Mary Lovely, a senior fellow with the Peterson Institute for International Economics. Thank you so much.

LOVELY: You're welcome. Transcript provided by NPR, Copyright NPR.