Yellen Criticizes China's Subsidies, Advocates for Public-Private Investment

U.S. Treasury Secretary Janet Yellen emphasized the importance of public investments to attract private capital for sustainable and inclusive growth, while criticizing China's excessive state industrial subsidies. Speaking to the Economic Club of New York, Yellen underscored that traditional Republican "supply-side economics" relies too heavily on tax cuts, which have not sufficiently benefited workers. Her remarks came as a rebuttal to Republican presidential candidate Donald Trump's economic vision, which focuses on tax cuts and deregulation. Yellen highlighted the Biden administration's significant legislative achievements, including the 2021 infrastructure law and semiconductor and clean energy investments. These initiatives have spurred $850 billion in private-sector manufacturing investments since Biden took office. Yellen argued that a robust economy requires a partnership between public and private sectors, advocating for "modern supply-side economics" that combines public infrastructure, education, workforce training, and government-supported research to foster private investment. Market Overview:

• Yellen emphasizes the need for public investments to attract private capital.
• Criticizes China's state industrial subsidies as excessive and harmful.
• Highlights Biden administration's legislative successes in spurring private investment.

Key Points:

• Biden administration initiatives have led to $850 billion in private-sector manufacturing investments.
• Yellen advocates for "modern supply-side economics" combining public and private sector efforts.
• China's subsidy model threatens global jobs and prompts new trade barriers.

Looking Ahead:

• Yellen optimistic about continued economic growth and falling inflation.
• Potential for new trade barriers if China continues its subsidy-driven overproduction.
• Emphasis on balanced U.S.-China economic relationship to avoid detrimental decoupling.

Yellen's speech also addressed the contrast between the Biden administration's approach and China's subsidy-driven model, which she argued leads to overproduction and global job threats. She warned that decoupling the U.S. and Chinese economies would be harmful, advocating instead for a balanced economic relationship. Yellen also touched on the possibility of imposing secondary sanctions on Chinese banks violating U.S. sanctions on Russia, emphasizing that large Chinese banks are cautious of such transactions. Yellen's remarks underscore the ongoing debate about the best strategies for sustainable economic growth, with a focus on leveraging public investments to drive private sector success. Her criticism of China's economic policies highlights the broader geopolitical implications of national economic strategies and their impact on global trade and job markets.