Yellen wants a ‘wall of opposition’ to Chinese policy

Stresa, Italy — US treasury secretary Janet Yellen said on Thursday that she wanted market-driven countries to present a “wall of opposition” to China over its state-driven industrial policies, a key issue she is pushing at a Group of Seven (G7) finance meeting this week.

Yellen also told a news conference that she was looking for “general agreement on the concept” from G7 finance ministers and central bank governors on a plan to bring forward the earnings from about $300bn in frozen Russian assets that could provide Ukraine with significant financial support beyond 2025.

The two topics are expected to dominate a meeting of finance ministers and central bank governors in northern Italy on Friday and Saturday.

Yellen said that many countries, including Mexico, India and SA, were concerned about China’s overinvestment in electric vehicles (EVs), solar products, semiconductors, steel and other strategic industries.

Without changes in Chinese policy, including a shift from increasing production to boosting domestic demand, Yellen said market-driven economies face a flood of cheap exports from China that will threaten the viability of their manufacturers.

She said she was not asking countries to mirror US tariffs or closely co-ordinate their trade policy responses. “But we need to stand together and send a unified message to China,” Yellen said. “So they understand it’s not just one country that feels this way, but that they face a wall of opposition to the strategy that they’re pursuing.”

Yellen’s call for G7 unity on China comes just after the Biden administration announced steep new tariffs on Chinese EVs, batteries, solar panels and other products in a bid to protect US investments to develop these industries at home. Some of these higher duties will start on August 1.

Yellen called this week for the US and Europe to respond to China’s overinvestment in EVs, solar products, semiconductors, steel and other key sectors in a “strategic and united way” to keep manufacturers viable on both sides of the Atlantic.

G7 negotiators have been discussing for weeks how to best exploit $300bn of Russian financial assets, such as major currencies and government bonds, which were frozen shortly after Moscow invaded Ukraine in February 2022.

Yellen also said that if G7 ministers could agree on a concept for bringing forward the earnings on the Russian assets, they would spend the time before a G7 leaders’ summit in Puglia in mid-June on refining the details.

She added that while a figure of $50bn had been discussed, there had been no decisions on the size of a potential loan to Ukraine that would be backed by earnings of about $3.5bn. “This is an assured source of financing and it’s important that Russia realise that we will not be deterred from supporting Ukraine for lack of resources,” Yellen said.

The funding could sustain Ukraine beyond 2025, as Ukraine now has a $60bn US package of aid and about $50bn from the EU.

Reuters