Janet Yellen came-China was polite

Janet Yellen came, she pontificated and postulated, ate some nice Chinese food, drank a beer with Nicholas Burns, a man that Chinese people loathe and hold little respect for; then she left. This tells the world all about her trip, what she ate and drank was more important than what she said and did.

It was, according to her, a trip about China’s over-capacity and she came with a request to China: please slow down your economic growth because you have an over-capacity and are flooding the market.

In fact as far as US is concerned, the opposite is true for cars and solar panels, there is already a 2.5% plus a 25% tariff on Chinese cars, and there are subsidies up to $7,500 on US built EVs, so no one is buying Chinese built cars in the USA, they would be mad to do so. And Trump has promised a further 60% hike if he gets in. Chinese solar panels are not flooding the US market either because they have been tariffed as high as 250% since 2011.

Chinese lithium-ion batters are impacting the US market for sure, but this is only because the US manufacturing is at least 10 years and maybe as much as 20 years behind China and that’s not China’s fault!

The US and the EU have made it pretty clear that they don’t want China’s cheap EVs and that’s fine because, as we already know, China’s trade with the “under-developed world” has for the first time recently surpassed the trade with the developed world. This, and the domestic market, are where China’s “over-capacity” will go.

What this means to the developed world is that their decline is in their own hands, if they plan on putting tariffs onto more of China’s products, then so be it, China, we can be sure, will still be competitive, even with tariffs and probably still sell more than US and European manufactured into the same markets, the only difference will be that the prices will be higher, inflation will be higher, the quality will be the same, if not better.

The days of being poorly made in China are long gone, they were never really here in the first place, products were poorly made because buyers drove prices down, when they wanted high quality, they got high quality, this is why Apple phones, IBM computers, BASF, VW, Toyota, Mercedes Benz and many others came to China, they knew they could get quality, the world has received quality products for a very long time from China but has held up the old trope that made in China means made with slave labour, made with poor working conditions and made with low quality control. All of which we now know to be untrue.

China has put a rover on Mars, sent machines to the moon and returned with samples, had several teams in space and brought them all home; it’s clear that quality is not the issue, price always was. So China got better at keeping prices down than everyone else.

Instead of settling on low quality, China fixed supply chain problems, invested trillions in R&D and education until it now has the world’s top science and technology universities, graduating the highest number of well qualified scientists, engineers and technicians, in fact, in one survey, China now has 6 of the top 10 Tech universities in the world.

This visit by Yellen was not at all about China’s over-capacity, it was about USA’s under-performance, China has overtaken the USA in every measurable metric except, so far, nominal GDP but even that is a dubious claim with USA accounting for a strong dollar, high interest, high medical costs and imputed rental income rather than proper infrastructure and manufacturing investments. The US is losing, in fact, has already lost the top slot and China has taken it over, this is what Yellen was really complaining about.

It is certain that Yellen would like to bring interest rates down, but can’t, at least not while inflation hovers above 6%, which makes the desire to increase prices of necessary goods such as EVs and photovoltaics so unreasonable – she should be asking China tom come to the USA and help rebuild their manufacturing of these products, not keeping them out.

Global Times and other Chinese media report the visit was one of mixed messages, and indeed it was, Yellen, under Biden’s leadership says she wants to continue the high-level meetings and promote exchanges between the two countries, but Biden has made it clear in personal statements and through Gina Raimondo’s statements that the US MUST work with Europe to “slow China’s growth” that their intention is to ensure that the US stays on top of the heap – it doesn’t come much more mixed than that.

Evidence of what US really wants is clear to anyone paying attention. There are ongoing attacks on trade by Congress, the president’s own Inflation Reduction Bill, the so-called Tik Tok Ban, the visit by Japan’s Fumio Kishida to Washington with ambitions to join AUKUS and increase the military presence in the region, the constant misinformation about the actions of the Philippines and accusations of China’s aggression. Students being turned away at US borders despite holding valid documents and the constant increases in military presence in the region and military expansions with Taiwan.

These are the real messages that Chinese people are seeing and they don’t match the bland and pithy words that Yellen spoke about cooperation and peace. Some might say she’s not playing from the same playbook but it’s also possible that, since her words do nothing to mitigate the views of China’s population that a great power is doing all it can to hold them back. In fact, they are all indicators that Yellen’s visit is just a feint and very much part of the playbook.

She posted on X that she had productive meetings, she experienced intensive diplomacy, she hopes to advance American interests and engage with Chinese people, she wants a clear-eyed approach and is hoping to proceed with caution to protect US national security and finally she hopes we can all live in a peaceful world.

Either Biden, Blinken and Yellen want to work with China, or they don’t, but these unremarkable posts with statements that say nothing of substance, when compared to the actions US has taken, do not in any way reassure Chinese people that the USA is sincere.

Little wonder what she wore, what she ate and how great her chopstick skills are were more important to Chinese citizens than the messages she brought with her from her President. Let’s not forget, the people of China are nothing if not polite, they wouldn’t want to say what they really think.