China’s woes won’t slow US economy, but excess capacity a concern, says Treasury’s Adeyemo By Reuters

© Reuters. U.S. Deputy Treasury Secretary Wally Adeyemo speaks on the Royal United Companies Institute in London, Britain, October 27, 2023. REUTERS/Hannah McKay/File Photograph

By David Lawder

(Reuters) -U.S. Deputy Treasury Secretary Wally Adeyemo mentioned on Friday that he’s involved about China’s extra manufacturing capability spilling over to the worldwide economic system, even when China’s present financial woes are unlikely to gradual U.S. progress within the close to time period.

“I’m not involved in regards to the headwinds from China having a big impression on the US economic system,” Adeyemo instructed a Council on International Relations occasion in New York, referring to challenges from its property sector, an growing older inhabitants and a worsening enterprise local weather for personal corporations.

“The factor that I’m basically involved about from China is extra capability coming from China and hitting the worldwide economic system,” Adeyemo mentioned.

China’s closely backed manufacturing capability for electrical automobiles, photo voltaic panels and different items has adopted industries reminiscent of metal and aluminum in producing extra items than China can devour, he added.

“Essentially that overcapacity goes to go someplace,” Adeyemo mentioned, including that U.S. tariffs and tax credit for EVs and their batteries will assist maintain Chinese language EVs out of the U.S. market and permit American corporations to compete extra pretty.

“That is going to be a problem for the worldwide economic system and it is one thing we’re speaking straight with the Chinese language about,” Adeyemo mentioned. “They should compete on a degree enjoying subject, not simply with america, however with nations world wide.”

U.S. Treasury Secretary Janet Yellen is predicted to lift her issues about Chinese language extra capability with counterparts on the sidelines of a Group of 20 finance ministers assembly in Sao Paulo, Brazil, subsequent week, a senior Biden administration official mentioned.

DOLLAR DOMINANCE

Adeyemo, who introduced a brand new spherical of U.S. sanctions on over 500 Russian-linked targets a day earlier than the second anniversary of Russia’s invasion of Ukraine, downplayed the potential for injury to the greenback’s standing because the world’s reserve foreign money from such measures. He mentioned it was vital that sanctions be multilateral and focused to maximise their effectiveness.

“Essentially, my view about this query of whether or not the usage of sanctions goes to result in some challenges to the greenback, is that the factor that is going to matter to the greenback’s position within the world economic system is not the power of our economic system.”

He mentioned Biden administration insurance policies, together with investments in infrastructure, semiconductors and clear power applied sciences, have made the U.S. a extra enticing funding vacation spot.

“So long as we’re capable of proceed to do this, I be ok with the truth that the greenback, America’s monetary system, goes to stay dominant on this planet,” Adeyemo mentioned.