New US-China talks to tackle 'overcapacity', Treasury chief Yellen says after day 2 of meetings with Vice-Premier He

China and the United States will hold more talks on industrial "overcapacity", US Treasury Secretary Janet Yellen said on Saturday, after a second day of discussions with Chinese Vice-Premier He Lifeng in the southern city of Guangzhou.

Yellen, who is visiting China for the second time in nine months, described her talks with He as "extensive and productive".

"We agreed that the US and China will hold intensive exchanges on balanced growth in the domestic and global economies. These exchanges will facilitate a discussion around macroeconomic imbalances, including their connection to overcapacity," she said in a statement from the US Treasury Department.

Do you have questions about the biggest topics and trends from around the world? Get the answers with SCMP Knowledge, our new platform of curated content with explainers, FAQs, analyses and infographics brought to you by our award-winning team.

"These discussions are critical to protecting American interests and to making further progress toward the healthy economic relationship the vice-premier and I jointly seek."

Future talks would be led by the US Treasury and Chinese finance ministry, the department added in a separate statement.

The agreement in Guangzhou came a day after Yellen said excessive Chinese exports could undercut American interests and lead to "global spillovers".

In a brief statement on the talks from state news agency Xinhua, Beijing said it had responded fully "to the production capacity issue" and expressed "serious concerns" about US trade restrictions against China.

Yellen and He had an "in-depth, candid, pragmatic and constructive exchange of views" and agreed to continue discussion on economic and financial issues concerning both countries through the working groups they set up last year, the statement said.

Yellen, who arrived in Guangzhou on Thursday, also met He on Friday for "frank and substantive" talks on the bilateral economic relationship.

Yellen's five-day visit to China comes close on the heels of Tuesday's phone call between Chinese President Xi Jinping and his US counterpart Joe Biden, the first such talks since their November meeting in San Francisco where they agreed to increase communication and manage tensions through a range of working groups.

The discussions aim to help ease strains that have intensified on all fronts.

Washington has expressed increasing alarm in particular about what it calls "overproduction" of Chinese electric vehicles and solar modules, technologies that China dominates and sees as engines for future growth and exports.

The United States has already taken action to curb imports of Chinese EVs, including launching a national security probe. It is also considering raising duties on the vehicles, which are already subject to tariffs of 27.5 per cent, prompting China to complain to the World Trade Organization about "discriminatory" measures.

The US has also complained about the lack of a "level playing field" for its businesses in China, saying tightened state regulations and frequent raids on American companies have hampered their development.

Yellen said she raised concerns with He regarding "the breadth and scale" of China's "non-market policies and practices" towards American businesses.

But she also said the Treasury Department and China's central bank would engage in new exchanges to tackle money laundering and financial crime.

"This new effort will enable the US and China to share best practices and provide updates on the actions we are each taking to close loopholes in our respective financial systems," she said.

The pair also discussed "recent national security actions", while Yellen urged Chinese companies not to provide support to Russia's invasion of Ukraine.

The talks on Saturday ran past the scheduled 2½ hours and delayed a more intimate meeting between Yellen, He, and one other official from each side, according to Reuters.

Yellen was expected to leave in the afternoon for Beijing, where she will hold a flurry of meetings with other senior Chinese officials on Sunday, including Premier Li Qiang, Finance Minister Lan Foan, and Beijing mayor Yin Yong.

She will also meet leading Chinese economists, and students and professors from Peking University.

On Monday, she will hold separate meetings with Pan Gongsheng, the governor of China's central bank, and Liu He, the former vice-premier and economic tsar who retired last year but is believed to still play an influential role in China's economic policy.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2024 South China Morning Post Publishers Ltd. All rights reserved.

Copyright (c) 2024. South China Morning Post Publishers Ltd. All rights reserved.