Yellen vs. China over unfair clean energy subsidy | naked capitalism

Janet Yellen, U.S. Treasury Secretary, plans to visit China next month and intends to put pressure on China's environmental energy policy.

There is an interesting question of where to draw the line between subsidies that are anti-competitive and those that are considered legitimate. The U.S. has a lot to explain in this regard, as we have poorly cared for our industrial base and allowed financiers to engage in short-term thinking, which has led to a depletion of research and development programs by the government.

Marianne Mazzucato, in her book The Entrepreneurial State, gives the example of a study on LED flat panels that was sponsored by the U.S. federal government to give an advantage to U.S. manufacturing. Venture capitalists refused to fund LED companies, despising their potential profitability.

Experts, such as Michael Pettis, point to the huge dollar volume of GDP that China has been devoting to real estate development. Now, with prices plummeting and even facing deflation, China has turned to promoting green energy investment.

This is reportedly happening on a scale that is lessening the impact of the burgeoning real estate bubble. This is where the frustration with the lack of data comes in (in honor of this post, below is some information). The increase in lending does not prove the scale of government support. Nevertheless, such a large increase doesn't seem entirely natural.

Here's what U.S. Deputy Prime Minister and Treasury Secretary Janet Yellen said on the matter: "We're now seeing overcapacity in 'new' industries such as solar power, electric vehicles and lithium-ion batteries gaining momentum," Yellen added.

Of course, there is also a philosophical aspect. Many experts recognize that widespread adoption of green energy sources and products requires a lot of government support, including potentially significant subsidies. So, if the US and EU are not willing to provide sufficient support for widespread use of these products, should we complain about China filling the gap? This is yet another case where the movement to save the planet gets tangled up in commercial interests and the desire to save jobs.

We'll probably see some qualified commentary soon on whether Yellen's accusations are valid in terms of WTO rules, or whether it's mostly political noise.