China's trade policies may interfere with US relations: Treasury chief

By Ovunc Kutlu

ISTANBUL (AA) - US Treasury Secretary Janet Yellen said Thursday that China's trade policies may "significantly" interfere with Washington’s efforts to build healthy economic relationships with other nations.

"I am particularly concerned about China’s enduring macroeconomic imbalances," Yellen said at the Economic Club of New York. "China is a global outlier in terms of its very high saving rate -- 45 to 50% of GDP for roughly 20 years. This is roughly twice the OECD (Organisation for Economic and Co-operation Development) average. Such high savings reflect a lack of sufficient domestic consumption demand and risk leading to an expansion in China’s external surplus."

Yellen said China is currently directing a rising share of its savings into manufacturing, with unusually high investment rates in select industries, which lead to excess capacity.

She noted that China accounts for 30% of the world’s manufacturing output and it cannot rapidly grow that share without causing global displacement.

"China cannot assume that the rest of the world will rapidly absorb huge quantities of excess production to the detriment of domestic industries in other countries," she said.

Yellen argued that China's overcapacity threatens American firms and workers, risks its supply chains being artificially overconcentrated and poses additional security and economic concerns for the US.

"We saw in the past how overcapacity can decimate businesses here at home. We are now seeing the risks of that happening again, in key industries that matter to our long-term growth, such as electric vehicles, lithium-ion batteries, and solar, but also across a range of manufacturing industries," she said.

The Treasury cheif said the US will also continue to pursue "friendshoring," which involves deepening ties with a wide range of trusted allies to diversify its supply chains and support long-term economic growth.

The US and China represent 40% of combined global output and have the two largest financial systems in the world, according to Yellen, who noted that China represents a huge market for American manufacturers and firms by supporting more than 700,000 American jobs.