But will those words be backed up with action?
Treasury Secretary Jack Lew on Thursday reiterated that China must reduce its steel capacity and stop manipulating its currency.
But cutting overcapacity alone is not enough, he said.
“In dealing with excess capacity, it’s not simply a matter of shutting down excess facilities,” Lew said during an event held at the American Enterprise Institute. “China also needs to address the factors that fed the construction of excess plants and equipment.”
Some factors that Lew singled out included subsidized credit for state-owned enterprises and a habit of incentivizing the construction of industrial facilities without taking global demand into account. These reforms are ultimately necessary for China to move to a more consumer-driven economy, Lew said.
“This adjustment is necessary to bring about efficient use of resources, rebalance the Chinese economy and eliminate unfair trade,” Lew said.
Lew’s remarks echo those he made last week during the annual U.S.-China Strategic and Economic Dialogue in Beijing. Lew noted that “excess capacity has a distorting and damaging effect on global markets” and added that “implementing policies to substantially reduce production in a range of sectors suffering from overcapacity, including steel and aluminum, is critical.”
Nearly 15,000 American workers are currently laid-off because of a surge in subsidized steel imports from China, which are priced well below market value and in deceptive ways designed to circumvent international trade laws.
The problem stems from the fact that China is producing massive amounts of steel, far more than it can use. It needs to get rid of all that steel, so it dumps it into the United States and other countries. That’s causing chaos in the global steel market, and it's also unfair to American workers and companies, who operate in an open market and abide by labor and environmental rules.
China’s manipulative economic policies will likely come up in discussions over whether the U.S. should grant China market economy status, which Lew said wouldn’t be automatic as some have suggested. Instead, the Commerce Department will determine if the change in status should occur based on its own standards.
Lew was cautiously optimistic that China would reduce steel capacity and allow market forces to dictate the renminbi conversion rate, noting that it takes years to restructure an economy. What remains to be seen is if the U.S. will rightfully wait until this restructure occurs to grant China market economy status.