Yellen Implores China to Rethink Economic Growth Strategy

US Treasury Secretary Janet Yellen implored Beijing’s top leaders to fundamentally rethink their economic growth strategy, as she wrapped up a high-stakes trip to China that’s been a balancing act in strengthening bilateral ties while delivering stark criticisms.

China’s economic imbalances and massive government subsidies of certain sectors will “lead to significant risk to workers and businesses in the United States and the rest of the world,” she said at a press conference in Beijing on Monday.

Throughout four days of meetings, Yellen repeatedly framed China’s strategy of boosting its already huge manufacturing capacity as a widespread global concern, and urged leaders to focus instead on revving up domestic demand. President Xi Jinping has made bolstering advanced manufacturing a top priority as he seeks to achieve around 5% growth this year despite a deep real estate crisis.

Yellen’s second China trip in nine months, and likely her final one to the country as Treasury secretary, comes as the world’s biggest economies are trying to stabilize their tumultuous relationship while working out deep differences in policymaking. The US has criticized China for flooding the world with cheap goods, as it pours resources into the same green sectors the Biden administration is also trying to expand.

Beijing rejects that message, arguing its companies are being penalized by developed nations that can’t compete on price, and has filed a case with the World Trade Organization over American subsidies. Still, while Premier Li Qiang on Sunday advised Yellen against turning “economic and trade issues into political” matters, meetings between the two sides have been cordial.

“The US has leverage because China’s economy is still fragile,” said Christopher Beddor, deputy China research director at Gavekal Dragonomics, adding that it was Beijing’s interest to “play nice” with a US presidential election in November posing fresh risks. “That’s why even though Yellen is making harsh comments, they are not freezing her out,” he added.