U.S. Treasury Secretary Jacob Lew urged China on Monday to cut excess steel production that he warned is distorting global trade as the two sides opened a high-level dialogue overshadowed by tension over the South China Sea. The annual meeting of Cabinet-level foreign affairs, trade and other officials from both sides is meant to head off conflict. The sides also called for closer cooperation between the two biggest economies on climate change, global finance, agriculture and other fields. The U.S. agenda includes pressing Beijing to move faster with plans to reduce excess production capacity that its trading partners complain is driving a flood of low-cost steel into their markets, threatening thousands of jobs. Washington has responded by imposing anti-dumping tariffs on steel, and European officials say they are investigating.
"Excess capacity has a distorting and damaging effect on global markets," Lew said in a statement at the start of the two-day meeting. "And implementing policies to substantially reduce production in a range of sectors suffering from overcapacity, including steel and aluminum, is critical to the function and stability of international markets."
Beijing announced plans this year to slash the size of its state-owned steel and coal industries, costing millions of jobs. But plans for other bloated sectors including aluminum, glass and solar panels have yet to be announced. Speaking at the event's opening ceremony, Chinese President Xi Jinping promised action on reducing overcapacity but announced no new initiatives.
"China will redouble efforts to promote supply side structural reform," said Xi, who also is leader of the ruling Communist Party.
Washington also wants China to move faster to reduce a rising burden of corporate debt that could hamper economic growth. U.S. officials are pressing Beijing to ease market access for financial services, an area where foreign business groups complain China is trying to shield its companies in violation of free-trade commitments. Xi warned against allowing diplomatic tensions to disrupt mutually beneficial trade and other relations. He acknowledged that differences "are hardly unavoidable" but called on Washington to help manage them in a "pragmatic and constructive fashion." "What is important is to refrain from taking differences as excuses for confrontation," Xi said. Tensions have increased over China's claim to virtually the entire South China Sea.