Guangzhou, China. US Treasury Secretary Janet Yellen called on China on Friday to address manufacturing overcapacity that she said could cause global economic dislocation and to create a level playing field for American companies and workers.

Starting a five-day visit to China in one of the country’s major industrial and export hubs, she said she would raise industrial overcapacity and what the US considers to be unfair Chinese trade practices during what will likely be tough talks with senior China officials.

“There are a broad swath of economic interactions” between the US and China “that should remain uncontroversial,” she said at an event hosted by the American Chamber of Commerce in China in Guangzhou. But, she said, there are “Chinese practices tilting the playing field away” from US firms.

Yellen, the first Cabinet-level official to visit China since President Joe Biden met Chinese leader Xi Jinping last November, earlier told the governor of Guangdong province that it's important for the US and China to have open and direct communication on areas of disagreement.

"This includes the issue of China’s industrial overcapacity, which the United States and other countries are concerned can cause global spillovers,” she said.

After meeting the governor, Yellen spoke with US business leaders at the American Chamber event and took questions from them in an auditorium of a marbled convention center in the Baiyun District of Guangzhou.

“I’ve heard from many American business executives that operating in China can be challenging,” Yellen said at an event hosted by the American Chamber of Commerce in China on Friday afternoon.

Citing a recent survey by the Chamber that found that a third of American firms in China say they have experienced unfair treatment compared to local competitors, Yellen said the US has seen China “pursue unfair economic practices, including imposing barriers to access for foreign firms and taking coercive actions against American companies.”

“I strongly believe that this doesn’t only hurt these American firms: ending these unfair practices would benefit China by improving the business climate here. I intend to raise these issues in meetings this week,” she said in her speech.

Earlier in the day, she also met with American, European and Japanese business representatives to hear their concerns.

Guangzhou is the capital of Guangdong province, a Chinese manufacturing and export hub that is home to telecom giant Huawei and BYD, China’s largest EV maker. Huawei has been hit hard by US restrictions on semiconductor exports to China and is at the vanguard of Chinese efforts to become self-sufficient and a leader in technology.

Government subsidies and other policy support have encouraged solar panel and EV makers in China to invest in factories, building far more production capacity than the domestic market can absorb.

The massive scale of production has driven down costs and ignited price wars for green technologies, a boon for consumers and efforts to reduce global dependence on fossil fuels. But Western governments fear that that capacity will flood their markets with low-priced exports, threatening American and European jobs.

Yellen will head to Beijing next.

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