A group of senior U.S. officials is traveling to Beijing this week for a round of high-level meetings intended to underscore Washington’s concerns over a wave of Chinese goods flooding world markets.
The American officials, led by Jay Shambaugh, the Treasury Department’s undersecretary for international affairs, will hold discussions with their Chinese counterparts on Thursday and Friday, according to a Treasury official.
The planned meetings are the fifth gathering of an economic working group formed by both governments last year to enhance communication at a time of heightened competition between the world’s two largest economies. The group also includes Federal Reserve officials.
“It’s important that we have a resilient channel to discuss a range of economic topics with our [China] counterparts, in areas where we agree and especially in areas where we disagree,” Shambaugh said in a statement to The Wall Street Journal.
“During our trip,” he said, “we will further our discussions on China’s macroeconomic imbalances and industrial policies that risk causing significant harm to workers and firms in the U.S. and around the world.”
With the new round of conversations, the U.S. group led by Shambaugh, an economist by training, will seek to build on the warnings expressed by Treasury Secretary Janet Yellen during her April visit to China that the output by China’s enormous manufacturing machine has gotten too large for the world to absorb.
At a time of weak demand at home, Beijing has ramped up its manufacturing capacity, and sent excess capacity overseas. The policy choice reflects Chinese leader Xi Jinping’s emphasis on building up an all-encompassing industrial supply chain that can reduce China’s reliance on foreign products but increase the rest of the world’s dependence on China.
So far, such a policy has had an effect of squeezing industries around the world, raising the specter of a new global trade war. Many of China’s trading partners, from the U.S., Europe to even some in Asia that are considered relatively friendly to Beijing, are raising tariffs and other trade barriers aimed at fending off cheap Chinese goods.
The fear shared by Washington, Brussels and other capitals is that a wave of Chinese exports, often made with the help of state subsidies, could overwhelm their own industries, leading to job losses and business closures in a repeat of the so-called China shock, when Chinese exports such as steel disrupted global markets at the start of the 21st century.
This time, the stakes are higher for many in the developed world, as China is aiming its policy directly at the heart of the industries the West wants to foster itself, such as electric vehicles and renewable energy.
Meanwhile, Beijing has dismissed warnings about overproduction as a pretext by the U.S.-led West to suppress China’s rise. Beijing is also moving forward with its own challenge to U.S. industrial practices at the World Trade Organization.
The external criticism aside, Beijing also faces pressure from within. Unneeded factories have sapped corporate profits, wasted money and weakened productivity growth. Many economists in China have urged the government to shift its support from manufacturing to households to bolster domestic consumption.
However, the leadership so far has shown little willingness to change the policy. Instead, as the strain in U.S.-China relations continues, the Xi leadership has accelerated an industrial drive centered on EVs, semiconductors and artificial intelligence, and renewable energy—sectors seen as key for China’s efforts to outcompete the U.S.
In a July speech at the Council on Foreign Relations, Shambaugh said the U.S. is concerned about Beijing’s “clear preference today to push manufacturing even further as China’s growth driver,” with the significant spillover to American firms and workers.
In the statement to the Journal, Shambaugh said the U.S. delegation will also talk about areas of cooperation with the Chinese side in the working-group meeting, such as the debt and financing challenges faced by many developing countries.
China has spent a trillion dollars to expand its influence across Asia, Africa and Latin America through its Belt and Road infrastructure program. Now, as many of those countries struggle to repay their debt to China, Beijing has become central to multilateral negotiations aimed at providing debt relief to countries such as Zambia.
Write to Lingling Wei at Lingling.Wei@wsj.com
