US officials have expressed concern that China is planning to flood global markets with its products as it faces issues with overproduction.
A possible policy response from the US should not be seen as “out of the blue”, warned one of two officials said in an FT report.
Their warnings come as the EU also gears up for a probe into claims of Chinese subsidies in train manufacturing.
Dumping fears
Speaking to the FT, two senior US treasury representatives said that they had spoken to the Chinese economy vice-premier, He Lifeng, to put forward their concerns around the Asian nation’s economic policies.
Jay Shambaugh, US undersecretary for international affairs, recently visited Beijing to talk economics with Chinese government representatives. He told the FT: “Chinese industrial support policies and macro policies that are more focused on supply rather than thinking about where the demand will come from [are] going to wind up hitting world markets”.
“The rest of the world is going to respond, and they’re not doing it in a new anti-China way, they’re responding to Chinese policy.”
The fears are particularly acute in advanced manufacturing sectors, where green energy products such as electric vehicles (EVs) and solar panels could flood global markets as China seeks to mitigate a domestic demand shortfall.
The planned visit by US treasury chief Janet Yellen later this year will also see the topic discussed, Shambaugh added.
The Chinese response so far has been to note that the US Inflation Reduction Act has already partly mitigated the risk of Chinese imports flooding the US market by increasing the costs associated with them.
An expert on the Chinese economy from the Center for Strategic and International Studies, Scott Kennedy, told the FT that China should be encouraged to increase domestic demand by the US, or western nations “will have no choice” but to carry out subsidy investigations that could mean “substantially expanded restrictions on Chinese imports”.
Train trouble
Last year, the EU launched a similar investigation into claims that the Chinese government has provided subsidies to EV manufacturers, something China’s EU ambassador declared “unfair” in comments to Bloomberg last month.
Today (19 February), another dispute has broken out between the EU and China as the bloc launches a new investigation into possible Chinese subsidies in the manufacture of trains, aimed at undercutting European firms.
Chinese train maker CRRC Qingdao Sifang Locomotive recently bid €610m for a Bulgarian contract for the provision of 20 electric trains, coming in at 47.5% lower than the bid made by the closest competitor, Spanish supplier Talgo. It was also 46.7% below the bid expected by Bulgaria’s Ministry of Transport and Communications.
CRRC, the Chinese firm’s parent company and the world’s largest train manufacturer, has notified the EU under the Foreign Subsidies Regulation, which came into force last year.
The new rules mandate that companies “notify their public procurement tenders in the EU when the estimated value of the contract exceeds €250m”, as well as when the firm “was granted at least €4m in foreign financial contributions from at least one third country in the three years prior to notification”.
The EU’s internal market commissioner, Thierry Breton, said:
“Ensuring that our EU single market is not distorted by foreign subsidies, to the detriment of competitive firms that play fair, is vital for our competitiveness and economic security.
“The EU procurement market, accounting for over 14% of our GDP, is a strong economic tool. It is also an important geopolitical lever.”