Yellen Testifies About US Actions to Combat China’s Predatory Financing

U.S. Secretary of the Treasury Janet Yellen delivers a keynote address at the Treasury Department in Washington on Sept. 14, 2023. (Alex Wong/Getty Images)

Treasury Secretary Janet Yellen testified to Congress on July 9 about the “State of the International Financial System.”

Lawmakers only wanted to talk about one country: China.

Members of Congress in both parties have emphasized the China threat, with House Speaker Mike Johnson (R-La.) recently stating that the Chinese Communist Party (CCP) represents the “single greatest threat” to the United States’ national security.

During the Treasury secretary’s annual hearing before the House Financial Services Committee, Ms. Yellen faced questions from members about the United States’ efforts to combat the CCP’s predatory lending in developing countries, China’s overproduction of critical technologies, and U.S. efforts to aid Taiwan in its defense against the CCP’s aggression.

“We oppose in the World Bank and all of the [multilateral development banks] any lending to China whatsoever, given China’s income level and extensive lending around the world, and we have pushed and they have reduced very substantially the lending that they do. We vote against all of it,” Ms. Yellen told Rep. Andrew Garbarino (R-N.Y.), who had asked about China’s designation as a “developing country” by the International Monetary Fund (IMF), despite that it has lent more than $1.3 trillion to developing countries since 2021.

Ms. Yellen fielded several questions from lawmakers about China’s loans to developing countries to build public infrastructure under the aegis of its “Belt and Road Initiative,” which has been criticized by Western nations for indebting countries beyond their ability to repay, resulting in the cession of their sovereignty to the CCP.

“We are working extremely hard to relieve the debt burdens of low-income countries that clearly need to restructure their debt and are trying to do so in the context of an IMF program,” Ms. Yellen told the committee.

“China is often the holdout and the most difficult lender to deal with.”

She noted that the IMF had created a “sovereign debt roundtable” to help countries restructure their debt and said that “Zambia and Ghana are countries where progress has been made, where China has come to the table.”

Other members raised concerns about China’s mass production of cheap solar panels and computer chips, which they claim are undercutting U.S. producers and helping finance China’s geopolitical efforts.

“The World Bank aims to direct 45 percent of its financing in the next year to climate projects, which means the bank’s money may just go to purchase Chinese solar panels, batteries, and the like,” Rep. Erin Houchin (R-Ind.) said, referring to the bank’s objectives, led by its Biden-appointed President Ajaypal Singh Banga.

“This seems to be supporting China financially in their efforts to expand their geopolitical footprint. Why is the Treasury supporting this?”

Ms. Yellen responded that she is working to ensure “American firms know” about the procurement contracts for climate projects. Responding to a question from Rep. Ritchie Torres (D-N.Y.) about legacy computer chips, Ms. Yellen said that Chinese overcapacity is being stemmed by high tariffs, which the federal government has said will rise to 50 percent by 2025.

Taiwan, a strategic priority for the United States amid the CCP’s threats to retake the island, was another topic of concern raised by members.

Rep. Young Kim (R-Calif.) asked Ms. Yellen if she would support Taiwan’s membership to the IMF, for which legislation is pending before Congress but which China opposes.

“We have supported greater engagement between the IMF and Taiwan,” Ms. Yellen said, while stopping short of endorsing full IMF membership for the self-ruled island.

Ms. Yellen has been a leading figure in the Biden administration’s policies toward China; she visited China in April. She has been criticized for not being tougher on the CCP’s predatory economic activities, with some members of the committee expressing dissatisfaction with her testimony.

“I’m afraid that we are giving away our leverage on sanctions, and we’re believing the empty promises of the CCP officials,” Ms. Kim told the Treasury secretary.

The Chinese Mission to the United States didn’t immediately respond to a request for comment.