While speaking to students in Beijing on Sunday, United States Treasury Secretary Jack Lew said that China's excessive industrial capacity will have a corrosive impact on the world market in the future.

The potentially contentious comment was made ahead of talks between Lew with the senior Chinese officials on Monday. Lew told the students that the country's excessive industrial capacity is not just a domestic issue for China, but it has an "enormous effect on global markets" for products such as steel and aluminum. He pointed that now there are "distortions in global markets" due to the excess steel being produced in China.

Like Us on Facebook

Lew said that excessive capacity means "misallocation of resources." He pointed out that ultimately, to clear the market of the excess products, they should be sold at a price below the world market price.

Lew said he hopes that he will be able to make progress with senior Chinese officials about the matter adding that past discussions eased tensions between the United States and China on currency issues.

These past sessions Lew was referring to are the annual U.S.-China Strategic and Economic Dialogue. Lew's agenda for his meeting with Chinese officials include making progress on market access, opening China's financial services, and healthcare markets.

Cheap steel from China has allegedly flooded the United States market, prompting the U.S. Commerce Department to impose anti-dumping and anti-subsidy duties on a wide-range of steel products from the country. U.S. business groups have also complained about new Chinese regulations that favor local firms.

China produces more than half of the world's steel. Beijing has criticized the U.S. anti-dumping duties, describing it as irrational and harmful to diplomatic ties. China has also demanded more time to fully address the problem caused by its excess industrial capacity. 

TagsUnited States Treasury Secretary Jack Lew, china, excessive industrial capacity, steel and aluminum, Beijing, Chinese officials, U.S.-China Strategic and Economic Dialogue, students