Yellen: Nothing Off the Table to Respond to Chinese Market Distortions

Treasury Secretary Janet Yellen, during a Q&A with Reuters, said that China has acknowledged that its manufacturing overcapacity is a problem, but she said observers shouldn't expect a quick fix.

"This was a problem that developed over many years, it’s not going to be solved in a day or a week," she said. While she wants China to act to address the issue, "we don't want our industry wiped out in the meantime, so I wouldn't want to take anything off the table" in terms of protecting domestic industries that are being undercut by low prices caused by a glut of supply.

"My responsibility is to emphasize the undesirable spillovers to … subsidies on everything in the clean energy supply chain," Yellen said, and noted it doesn't just affect the U.S., it affects Europe, Japan, India and Mexico and other emerging markets.

She said that Chinese manufacturing capacity for solar panels is twice the annual demand for purchasing those panels.

"The United States had a healthy solar industry in the mid-2000s," Yellen said. "Chinese supply drove down prices to the point where many U.S. solar firms went out of business." Yellen said it's fine that China exports, "but the United States and Europe and other countries also want to have some involvement and some ability to produce clean energy products. We are concerned about overdependence on one single country" for clean tech.

Yellen said she discussed this issue both in China and last week, when senior Chinese officials came to Washington for International Monetary Fund meetings.

Reuters asked Yellen if she still feels, as she once did, that exporters who sell goods at low prices should be thanked. She said, "Generally I’ve been in favor of free trade, but it has to be something that broadly benefits people throughout the country." She said the surge of Chinese imports that followed China's accession to the World Trade Organization created a huge loss of good manufacturing jobs, and in some areas most affected by the import competition, employment never recovered.