Remarks by Secretary of the Treasury Janet L. Yellen at the Freedman’s Bank Summer Symposium

As Prepared for Delivery 

I am excited to have the opportunity to welcome you to the Freedman’s Bank Summer Symposium, which I am very glad Deputy Secretary Wally Adeyemo and many of my colleagues are able to attend in person.

The Freedman’s Bank Forum was named for the Freedman’s Savings and Trust Company, commonly called Freedman’s Bank. It was a private corporation chartered by the U.S. government in 1865 to provide newly emancipated Black Americans with financial tools for building security and wealth and was located where part of the Treasury Department now stands. Unfortunately, the Financial Panic of 1873, mismanagement, and other challenges led to the Bank’s closure, leaving tens of thousands of formerly enslaved people with millions in losses instead of their-newly established savings.

Under this Administration, Treasury has worked to realize the unfulfilled promise of Freedman’s Bank. It is clear that the economy has historically not worked well for Black families, communities, and businesses. We are committed to changing this: All Americans deserve opportunity, and unlocking the potential of those who have been overlooked and underestimated is essential to increasing our country’s economic strength.

Let me highlight just a few of our many efforts, starting with our historic investments in financial institutions and funds with a track record of investing in Black communities. We’ve invested more than $8.5 billion in community financial institutions, including $1.4 billion in Black-owned and Black-majority shareholder depository institutions. I understand that later today you will hear from M&F Bank, the second-oldest Black-owned bank in the country, chartered by the state of North Carolina in 1907 as part of a thriving business community in Durham. The Bank received $80 million from Treasury’s Emergency Capital Investment Program and additional funds from corporate partners through the Economic Opportunity Coalition.

Treasury’s efforts extend far beyond access to capital, including, for example, the generational investments we are making at the Internal Revenue Service that will make it easier for families, businesses, and neighborhoods to access tax credits to get more breathing room in their household budgets.

We have done a lot in the past few years. But we are well aware that we still have a long way to go, and this event is another step forward. Let me thank our hosts—Shaw University and Operation HOPE—for making this event possible. I was very glad to host the Freedman’s Bank Forum at the Treasury Department in Washington, D.C. last year. Hosting the Freedman’s Bank Summer Symposium here, in Raleigh, North Carolina, is a powerful reminder that our work spans the country and that it must be driven by communities and grounded in their needs.

Again, welcome to the Freedman’s Bank Summer Symposium. I hope it serves as an opportunity for you to hear about the breadth and depth of ongoing work and to recommit to the work ahead.


Remarks by Assistant Secretary for Financial Markets Joshua Frost on Principles of U.S. Debt Management Policy

As Prepared for Delivery 

Good evening and thank you to the Money Marketeers’ leadership for inviting me to speak with you this evening. I have been to several Money Marketeers events throughout the course of my career and firmly believe in the Money Marketeers’ laudable goal of “establish(ing) greater dialogue between the public and private sector on…substantive issues that move markets.” Consistent with this goal, a broad understanding of the way in which the Treasury Department finances the U.S. government is very much in the best interest of the taxpayer. Tonight, I will seek to demystify that process and explain the core principles that underlie our debt management strategy.

While Congress decides how much money the government spends and how much to raise in taxes, Treasury is responsible for financing the government. Put succinctly, Treasury is the “how,” not the “how much,” when it comes to debt issuance. In this role, our guiding principle, our North Star, is to finance the government at the least cost over time. Treasury, over decades and across Administrations, has sought to achieve this end through three key and interrelated principles: (1) by promoting a broad and diverse investor base to make the Treasury market the deepest and most liquid market in the world, (2) by being “regular and predictable” in our issuance, and (3) by maintaining a robust process to plan for and understand a range of fiscal outcomes.

In my remarks this evening, I will discuss our borrowing objectives, some qualities that make the Treasury market unique, details regarding our approach and process to financing the federal government, and the reasons why we employ such an approach. Hopefully, this will provide some useful insights that will deepen the public’s understanding of Treasury’s debt issuance policy decisions.

Treasury Borrowing Objective

Before I discuss our borrowing objective, it may be instructive to briefly discuss how we determine our borrowing needs.

Borrowing needs are largely driven by three factors: (1) the deficit, (2), the amount of maturing securities that Treasury needs to refinance, and (3) changes in the size of Treasury’s operational cash buffer. Of these three factors, the most challenging to estimate is of course the deficit. Treasury has an office of career staff – the Office of Fiscal Projections (OFP) – which forecasts deficits over both shorter- and longer-term horizons. OFP estimates daily fiscal flows and our cash balance for the next several quarters, and builds these estimates by staying in regular contact with federal agencies to help forecast outlays and with the Office of Tax Policy at Treasury to estimate receipts. Treasury’s Office of Debt Management meets twice a week with OFP to review the latest cash forecast and formulate its issuance decisions. 

For deficit forecasts beyond the next several quarters, Treasury looks to both internal information and a range of external forecasts – including those produced by the Congressional Budget Office (CBO), the Office of Management and Budget (OMB), and the primary dealers. By carefully evaluating a range of forecasts and the assumptions used to create them, Treasury can get a better sense of how its forecast is evolving relative to other forecasts. Both the shorter-term and longer-term forecasts figure into our decision making and communications around our quarterly borrowing announcements and our debt management policy statements. It is our aim to develop financing plans that are robust to a range of possible outcomes, particularly over longer time horizons. 

As I noted, Treasury’s primary debt management goal – our guiding principle – is to finance the government at the least cost over time. Before describing our strategies, I should clarify what we mean by the phrase “over time.” “Over time” is our recognition that Treasury borrowing is not a one-time event. In thinking about where to issue across the curve, Treasury does not simply find the lowest-yielding instrument at any given point in time and proceed to issue all new securities there.[1] Not only would that be impractical due to the amount of borrowing needed, but also, if it did so, yields would rise in response to the concentration of Treasury issuance that saturates demand for that tenor. Then, when Treasury moved to the next cheapest point, the cycle would repeat. It is worth noting that, among other reasons, Treasury issues a variety of instruments to address its borrowing needs because of a desire to source demand from the broadest possible group of investors. For example, money market funds aren’t interested in owning 10-year notes, just as pension funds hold only a small amount of their fixed-income allocations in short-term instruments like Treasury bills.

Deepest and Most Liquid Market

Turning to debt management strategy, you will often hear Treasury Department officials describe the Treasury market as the deepest and most liquid market in the world. With secondary market trading volume that averages nearly $900 billion per day, investors around the globe use the Treasury market as the safest and most liquid store of value. Among other use cases, Treasury securities are used to express views on the path of interest rates, to provide collateral for loans, to defease liabilities, and to implement monetary policy. Foreign investors play a particularly important role in the Treasury market, holding about 30 percent of outstanding marketable debt.

The depth and liquidity of the Treasury market is not something we take for granted. Treasury works across the official sector through the Inter-Agency Working Group on Treasury Market Surveillance (IAWG) to pursue policies to enhance the resilience of market liquidity, even in times of stress. Most recently, the IAWG – composed of staff from Treasury, the Board of Governors of the Federal Reserve System, the Federal Reserve Bank of New York, the Securities and Exchange Commission, and the Commodity Futures Trading Commission – has made significant progress toward several goals designed to improve the resilience and liquidity of the Treasury market, particularly in times of market stress. For example:

  • Treasury launched a buyback program that provides liquidity support for off-the-run securities, led an effort to implement further enhancements to the public release of data on secondary market transactions in on-the-run Treasury securities, and Treasury’s Office of Financial Research finalized a rule to establish ongoing collection of data on transactions in the non-centrally cleared bilateral repo market.
  • The SEC adopted new rules requiring central clearing of certain Treasury securities and repo transactions, and amendments requiring certain firms that are significantly involved in market-making of Treasury securities to register as broker-dealers. The SEC also made changes to reporting forms, with Form N-MFP providing more granular information about the activity of money market funds in the Treasury repurchase agreement and Form PF enabling better monitoring of the activity of liquidity funds and drawing clearer distinctions between cash and derivatives activity in the Treasury markets.

This work is purposeful, as we understand that taxpayers benefit from Treasury market liquidity through lower borrowing costs. When the secondary market is resilient, deep, and liquid, investors have a greater willingness to buy Treasury securities, knowing that they can liquidate those securities with minimal transaction costs. This directly translates into higher prices – and therefore lower interest costs – for Treasury when it sells those securities at auction in the primary market. 

The History of “Regular and Predictable”

In addition to maintaining a deep and liquid market, Treasury also seeks to follow a regular and predictable issuance framework as a means to finance the government at the least cost over time. 

“Regular and predictable” is a phrase that we use often, but rarely clarify. If you will indulge me, I would like to do a bit of a deep dive into the history of this paradigm, what it means, and the benefits of it.

It is probably worth noting that “regular and predictable” issuance, when it comes to bill issuance, is something that Treasury has done since the 1930s, but that has not always been the case for longer-dated instruments. Prior to the 1980s, Treasury issuance of longer-dated securities was largely ad hoc and opportunistic, with debt managers making one-off decisions based on their point-in-time view of market conditions and demand.

For example, in the quarterly refundings of the early 1960s, Treasury offered securities of different tenors with no clear pattern. Looking at 1962, for example, the February refunding included a 4½-year issue, followed by 3¾- and 9½-year issues in May. In August of that year, Treasury offered a 6½-year issue and a 30-year issue, before closing the year in November with 3-year and 9¼-year issues. Following the 30-year bond issue in August 1962, Treasury would not issue such a bond again until July 1964.

In 1972, Treasury started consistently issuing a 2-year note. However, such regularity of issuance did not apply to other coupon tenors, which suggests that Treasury officials at the time wanted to retain optionality around ad hoc issuance for longer-dated tenors. As the federal debt increased through the first half of the 1970s, the feasibility of an ad hoc approach deteriorated and, by 1975, Treasury debt managers first turned to the regular and predictable approach that has been the cornerstone of our strategy for close to 50 years now.[2] 

Hallmarks of the “Regular and Predictable” Strategy 

But what does it mean for issuance to be regular and predictable? At its most basic level, a regular and predictable issuance paradigm’s main characteristic is that the issuance of securities occurs on a consistent, preset schedule. For example, in the United States, Treasury sells all its benchmark securities at a regular cadence; coupon securities are sold once a month with the 2-, 5-, 7-year tenors being sold near the end of every month and the 3-, 10-, 20-, and 30-year tenors being auctioned in the middle of each month. Shorter-tenor securities (i.e., bills) are generally sold weekly, while Treasury Inflation-Protected Securities (TIPS) and floating-rate notes (FRNs) are sold once a month. Each quarter, Treasury publishes a tentative calendar for the following two quarters with all the tentative auction dates; anticipated coupon auction sizes for the upcoming quarter are published in the quarterly refunding statement.

Similarly, Treasury adjusts issuance sizes and the compositional mix slowly over time. Adjustments are informed by trends in structural demand and Treasury’s assessment of the optimal debt mix to achieve lowest-cost financing over time. One recent example of a shift in structural demand has been the increased demand for bills from money market mutual funds arising from the SEC’s regulatory reforms.

The aim is to minimize borrowing costs over decades, not respond to short-term changes in market pricing or attempt to time the market to capture technical rate dislocations. To provide as much transparency as practicable to market participants regarding Treasury’s issuance intentions, our borrowing plans are communicated publicly via our quarterly refunding announcements. I will get into more detail on this process in a few minutes. This transparency is meant to reduce unnecessary uncertainty that could result in investors demanding an additional risk premium to hold our debt, which would result in higher borrowing costs for taxpayers. 

While Treasury makes changes to most issuance only gradually, we frequently adjust bill supply when confronted with rapid, seasonal, or unexpected changes in borrowing needs. As a result, we often refer to bills as an issuance “shock absorber.” Because of their low level of interest rate risk, or duration, changing bill issuance is the least disruptive and most cost-effective way to adjust borrowing quickly or for a short period of time, especially for large changes in borrowing needs. 

For example, there is a seasonal increase in bill supply that occurs each February and March during tax refund season, which typically retraces in April as non-withheld and corporate tax receipts rise. Another example is the unexpected change in borrowing needs that Treasury experienced during the COVID pandemic. In 2020, Treasury was able to raise approximately $2.5 trillion in a single quarter by increasing bill financing. This would not have been feasible in longer-term coupon securities.

Treasury also makes significant changes to bill supply during debt limit impasses. Adjustments to Treasury issuance during such periods results both from the constraints on borrowing during the impasse, as well as the subsequent increase in borrowing to rebuild the cash balance once the impasse is resolved. For example, in the four months following the resolution of last year’s debt limit impasse, we increased the cash balance from a low of $23 billion to roughly $700 billion.

Our commitment to regular and predictable practices extends beyond our auctions. In May, we launched a buyback program with the stated intent of following a “regular and predictable” process. At the program launch, we published a quarterly schedule of operations to provide investors with more certainty about the timing of the specific weekly opportunities to sell “off-the-run” Treasuries back to us. We plan to continue to publish such schedules in future quarters.

The regular and predictable paradigm also impacts our thinking about new products. New products are rarely introduced by Treasury and when they are, they are carefully considered. Treasury spends a lot of time thinking about the long-term demand for any new product. We ask ourselves three basic questions: (1) is there likely to be stable demand for such a product over time, (2) would the new product adversely affect demand for existing products, and (3) can the new product be issued in benchmark size? 

The key point is that when we introduce a new product, Treasury wants to be sure that it can commit to that product for the long term because we recognize that market participants, particularly intermediaries, will need to commit resources to supporting that product in both the primary and secondary markets. Investors will also want to be assured that a new product will not disappear soon after it is introduced and leave them with a liquidity-impaired instrument. To garner sustained support from investors and intermediaries, we remain regular and predictable.

Introducing a new product, however, is rare. When facing changes in borrowing needs, Treasury tends to first make changes to the auction sizes of existing products. These changes are made in a gradual and transparent manner, and changes to coupon sizes generally are in response to well-formed views on structural changes to demand or to changes in borrowing needs. The increase in auction sizes between August 2023 and April 2024 is a good example of such a shift.

When structural borrowing needs have increased or decreased substantially and changes to auction sizes of existing products have proven insufficient, Treasury has typically met this need by changing the frequency with which it sells existing products. This sort of change is much less frequent and is telegraphed well in advance. An example of this is changes that were made to the TIPS calendar in 2019. A less-frequent option is to add new tenors to existing products, with recent examples including the introductions of 20-year bonds and 6-week, 8-week, and 17-week bills. Least frequent is the introduction of a completely new product type, such as the introduction of TIPS in 1997 or FRNs in 2014.

Benefits of Regular and Predictable

I have spent a lot of time explaining what “regular and predictable” issuance is and how it works. Now, I will focus on the benefits of this paradigm, some form of which is employed by most of the G7. Smaller sovereign issuers typically use a more opportunistic approach to funding, and that approach works for them. 

As I noted earlier, the primary reason Treasury uses this paradigm is that it lowers the cost of borrowing over time. A regular and predictable debt issuance program helps to imbue benchmark on-the-run securities with a liquidity premium. Treasury’s regular new issue structure encourages activity in the most recently issued securities, which, because of the extra demand for those securities, lowers Treasury’s borrowing costs. This is evidenced by the yield differentials observed between on- and off-the-run Treasury securities. 

A regular and predictable issuance program also facilitates investor planning and encourages broad auction participation because everyone knows when the auctions are and can make investment decisions accordingly. Unlike other approaches, you don’t have to be an “insider” or market expert to invest in Treasury securities. Together with the single-price auction process, where all winning bids are filled at the same clearing level, the regular and predictable schedule is one of the reasons why Treasury auctions get a significant amount of involvement from retail investors. This broad participation benefits taxpayers and investors.

A regular and predictable issuance paradigm also helps to limit the possibility of Treasury supply decisions serving as a source of market uncertainty and risk. If market participants were worried that Treasury might unexpectedly issue additional securities at a given tenor, they would demand a higher yield when buying those securities to account for this risk. In August 2015, Treasury asked the Treasury Borrowing Advisory Committee (TBAC) to look at the costs and benefits of regular and predictable issuance, and their conclusion was that historically it had saved Treasury tens of billions of dollars over the 17-year period that they examined.[3]

Regular and predictable issuance also help us lower rollover risk by spreading out maturities in a consistent pattern. Spreading out maturities of the securities that we issue limits “lumpiness” in the maturity profile that would otherwise occur if Treasury were to concentrate issuance on a smaller number of maturity dates. A lumpier maturity profile would represent significant risks for Treasury, as a great volume of securities would need to be refinanced on a few key dates.

Regular and predictable issuance also helps the Treasury market fulfill its role as the most important global risk-free interest rate. For example, it provides a reliable benchmark for other borrowers (including corporate bonds) and for a host of financial products (including interest rate swaps).

It is also worth noting that government borrowing costs likely would not benefit from Treasury trying to be opportunistic. First, there would be no reason to think Treasury would have a greater ability to predict the direction of interest rates than the market does. Second, any attempt to behave opportunistically and capture perceived “value” opportunities would fail. The market would move well before Treasury could realize the benefits of behaving opportunistically. Treasury announces its activities publicly in advance and relies on market participants to bid competitively in its auctions. Any opportunities that might exist to opportunistically capture value would disappear the moment Treasury announced its intention to capture them. Attempts to move in small increments to capture value would likely have minimal effect given the overall size of the federal debt. Even if there were short-term gains to be had, they would likely be more than offset by greater costs over the long run as market participants priced in an uncertainty premium. 

Finally, our regular and predictable approach allows Treasury to gather feedback from a wide variety of market participants. Seeking the broadest possible range of views helps ensure that Treasury makes the best-informed decisions possible.

Debunking Common Misconceptions

I would also like to take a few minutes this evening to address some common misunderstandings about Treasury issuance that we often hear in the marketplace.

One common misperception is that “regular and predictable” means Treasury must never make changes to its issuance plans. This theory rests on the false premise that, once Treasury has a broad issuance plan in motion, it never refines that plan along the way and should ignore market demand signals. History contains many counterexamples; for example, when reducing coupon auction sizes in 2021 and 2022, Treasury reduced 7- and 20-years more, and when increasing auction sizes in 2023 and 2024, Treasury increased those sizes less. Both of these adjustments were made in response to market feedback and our assessment of structural demand. Regular and predictable issuance does not require blind continuation of past practice in the face of new information.

Another example of this sort of misperception occurred in November 2023. At that time, Treasury made an exceptionally modest adjustment to the pace of auction size increases for longer-dated securities. This was driven by Treasury’s views of structural demand and updates to expected borrowing needs, both of which were informed by a rigorous process that I will describe shortly. Total gross monthly coupon issuance was approximately $300 billion per month at the time, so our adjustment – reducing the pace of increase of 10-, 20-, and 30-year securities by $1 billion per month per security – represented a roughly 1 percent change. This kind of modest adjustment is exactly what the regular and predictable framework calls for. This was not outside of any norms – it was consistent with the expectations of many primary dealers and with the recommendations of the TBAC. 

Another common misperception that bills as a share of total marketable debt need to remain in a 15–20 percent range. This is not the case. Going back to 1980, bills have been as high as 36 percent of Treasury debt and as low as 10 percent and have been in the 15–20 percent range only about 13 percent of the time during that period.[4]The notion of a 15–20 percent range has its roots in late 2020. In November of that year, the TBAC recommended that Treasury allow the bill share to gradually decline into the 15–20 percent range after it had moved briefly above 25 percent to finance the pandemic response. The TBAC’s recommended range was centered below the long-term average of 22 percent, but above the average during the prior decade. In November 2021, the bill share had dropped to 17 percent, and the TBAC reiterated its recommendation to maintain a 15–20 percent range, noting that cuts in coupon issuance were needed to prevent bill supply from dropping too low, which would present risks to market functioning. However, the TBAC emphasized that “there is flexibility in the TBAC’s recommended range for bills to either fall below 15 percent of outstanding stock (in which case excess cash will likely get absorbed by the RRP facility) or for bills to rise modestly above 20 percent while still maintaining financing flexibility for Treasury.” In August 2023, the TBAC reiterated that it was “comfortable running T-bills in the range of their longer-term historical share of 22.4 percent for some time before returning to the recommended 15–20 percent range, in order to maintain a regular and predictable approach to increasing coupon issuance.”

In short, the TBAC recommendation of a 15–20 percent range is relatively recent, and the TBAC has repeatedly said that Treasury should maintain flexibility on the 15–20 percent range in support of regular and predictable issuance. This is consistent with the “bills as a shock absorber” tenet I described earlier. If the 15–20 percent range were to be considered a hard rule, responding to shocks would require large and rapid changes to coupon auction sizes, contrary to our longstanding approach.

Refunding Process

Finally, I want to focus a bit on Treasury’s financing process and, in particular, our communication with market participants. Not only is this part of Treasury’s adherence to the regular and predictable framework, but it also builds confidence in our decisions via a thorough process with extensive input from professional career staff and market participants.

The quarterly refunding – the term for the quarterly process in which changes in debt management policy are considered, made, and communicated – is the most important way that we interact with the market when communicating policies and other details about debt management. This cycle of activity repeats every three months and culminates in our quarterly refunding statement. But there are many steps that take place ahead of that statement. 

Nearly three weeks before Treasury publishes the quarterly refunding statement, career staff at Treasury begin gathering information from market participants that is used as one of several inputs in the development of debt management policy – both for the current quarter and for the longer term. We start by engaging with the primary dealers – institutions that are designated as such by the New York Fed and that are expected to bid their pro rata share in every Treasury auction. We issue a publicly available survey to primary dealers each quarter, the results of which help us to better understand supply and demand dynamics and market expectations for Treasury auctions. In addition to surveying all of the primary dealers each quarter, Treasury meets directly with half of the primary dealers each quarter to gather additional context on their responses.

On the Monday of refunding week, Treasury announces its estimates for how much the government will need to borrow for the next two quarters. As mentioned earlier, Treasury considers a range of estimates of borrowing needs, including those from OMB, CBO, and the primary dealers. These inputs support the development of the point estimates published as part of this release. Such forecasts are of course subject to uncertainty, including from the course of macroeconomy or legislative changes that impact fiscal flows. In designing its borrowing plan, Treasury seeks to preserve flexibility in managing against a range of potential outcomes for realized borrowing needs.

The next day (the day before the quarterly refunding statement release), Treasury meets with the Treasury Borrowing Advisory Committee. The TBAC, a federal advisory committee that has operated in various forms since the 1950s, is charged with providing advice to Treasury on matters related to borrowing and debt management policy. The members of TBAC are senior subject matter experts who represent a broad range of Treasury market investors and intermediaries. The types of firms that are represented on the TBAC include asset managers, primary dealers, money market funds, insurance companies, pension funds, hedge funds, regional banks, and custodial banks. The broad range of firms on the TBAC ensures that Treasury receives input that represents a diverse set of perspectives. Among other things, the TBAC is asked to provide recommendations about Treasury issuance (getting advice about “how” it should borrow) as well as advice on special topics, referred to as “charges.” While Treasury makes the decisions about issuance, inputs from the primary dealers and from the TBAC ensure that Treasury’s decision making takes into consideration the expectations and recommendations of a broad variety of market participants, both from Treasury market investors and intermediaries. 

Finally, on the Wednesday of refunding week, Treasury announces its anticipated borrowing plans for the quarter, updates on other relevant topics, and tentative auction and buyback schedules. We release materials from the TBAC meeting and hold a live, on-the-record press conference, both available on Treasury’s website. Consistent with the goals of acting in a regular and predictable fashion, the quarterly publication of these materials provides a great degree of transparency about what Treasury is thinking with respect to policy ideas under consideration at that time.

During each quarter, Treasury also follows a structured process for announcing, auctioning, and settling securities. As coupon auctions are formally announced, the offering sizes are nearly always consistent with the guidance provided at the quarterly refunding.[5] Similarly, Treasury now formally announces buybacks each week, based on the anticipated schedule released at the quarterly refunding.

Bill auctions are typically announced each Tuesday and Thursday. Because bill supply is used as an issuance “shock absorber,” Treasury needs to wait for up-to-date information about fiscal flows before finalizing offering sizes. In all cases, there is a regular process for announcing, auctioning, and settling either the sale of securities or purchases made via buybacks.


I have covered a lot here this evening, and hope that you leave here with a few key takeaways.

Our mission when it comes to debt issuance is to finance the government at the least cost over time. This mission statement has existed for several decades, and we never lose sight of that North Star. 

We seek to finance the government at the least cost over time in three key ways—first by promoting market liquidity and resilience, second by issuing securities in a regular predictable manner, and finally by utilizing a clear, regular refunding process.

Market liquidity and resilience benefit taxpayers in the form of lower borrowing costs. Liquidity often comes up in our outreach to investors, and it factors into all of our thinking regarding policies, processes, and regulations related to both the primary and secondary markets. The Treasury market is the deepest and most liquid market in the world, and our goal is to keep it that way. 

We issue securities in a regular and predictable fashion as part of our strategy to borrow at the lowest cost over time. This half-century-old issuance paradigm continues to serve us well. As noted earlier, regular and predictable issuance doesn’t mean that Treasury steadfastly “stays the course” even when presented with new information and situations. That would be inefficient because borrowing needs and investor demand change over time. Instead, being regular and predictable provides a framework for making changes in the least disruptive way possible, which minimizes risks to investors and ultimately translates into lower borrowing costs for Treasury. 

We implement our strategy with clear, regular processes, after seeking a wide range of inputs to inform our decision-making. Treasury provides transparency about its choices, its reasoning, and, as much as practicable, about its issuance plans while retaining flexibility to respond to the unforeseen events that inevitably arise.

Before I close, I want to recognize the efforts of the many professionals, past and present, who have worked on debt management issues across the Treasury Department over the decades and across Administrations. Most of all, I want to highlight the work of the Office of Debt Management, a team of career staff at Treasury without whom the Treasury market would not be the global standard that it is today.

Many of the concepts we have talked about this evening, many of the processes that we have discussed, were implemented decades ago and have been refined along the way. But one critical idea has not changed: Treasury continues to aim to finance the government at the least cost over time.

Thank you for the opportunity to speak with you today.



[1] In addition to the considerations noted in this section, the level of yields at different maturity points is not necessarily the “right” metric. For example, if longer-term yields were at 4.5%, issuing short-term debt today at 5% might have a lower expected cost if the average expected short-term rate over the longer term was 4%.

[2] For more information on the history of regular and predictable issuance, see Garbade, Kenneth, “The Emergence of ‘Regular and Predictable’ as a Treasury Debt Management Strategy,” Economic Policy Review, Volume 13, Number 1, March 2007 (available at

[3] TBAC Charge on “The Meaning and Implications of “Regular and Predictable” (R&P) as a Tenet of Debt Management” August 2015 (available starting on page 51 at

[4] See “Office of Debt Management: Fiscal Year 2024 Q2 Report,” p. 25,

[5] The only recent deviation occurred in the spring of 2020. Borrowing needs changed dramatically in response to the pandemic, which led Treasury to increase auction sizes ahead of the May refunding.

U.S. Department of the Treasury, IRS Announce $1 Billion in Past-Due Taxes Collected from Millionaires

Major Milestone Reached Under Initiative Launched Last Year Under Inflation Reduction Act

WASHINGTON – Today, the U.S. Department of the Treasury and Internal Revenue Service (IRS) announced that a new initiative to collect past-due tax debt from high-income, high-wealth individuals has reached a major milestone, with more than $1 billion recovered. This new initiative was made possible by resources from President Biden’s Inflation Reduction Act. 

The IRS in 2023 launched a new initiative to pursue high-income, high-wealth individuals who have failed to pay recognized tax debt, with dozens of senior employees assigned to these cases. This campaign is concentrated among taxpayers with more than $1 million in income and more than $250,000 in recognized tax debt.

“President Biden’s Inflation Reduction Act is increasing tax fairness and ensuring that all wealthy taxpayers pay the taxes they owe, just like working families do,” said U.S. Secretary of the Treasury Janet L. Yellen. “A new initiative to collect overdue taxes from a small group of wealthy taxpayers is already a major success, yielding more than $1 billion in revenue so far.”

In an initial success, the IRS announced last year that it had collected $38 million from more than 175 high-income, high-wealth individuals. The IRS then expanded this effort last fall to 1,600 additional high-income, high-wealth individuals. The IRS has assigned more than 1,500 of these 1,600 cases to senior employees, with more than $1 billion collected to date.

Prior to President Biden’s Inflation Reduction Act, more than a decade of budget cuts prevented the IRS from keeping pace with increasing complexity and ensuring that wealthy taxpayers, large corporations, and complex partnerships pay taxes owed under current law. The effort to pursue high-income, high-wealth individuals who have failed to pay past-due tax debt is one of several initiatives the IRS has launched to improve tax fairness and reduce the deficit. In the past two years, the IRS has launched: 

  • A new initiative to crack down on abuse of corporate jets for personal travel. 
  • A campaign to collect taxes owed by 125,000 high-income, high-wealth earners who have not filed taxes in years. 
  • Audits of 76 of the largest partnerships with average assets of $10 billion that represent a cross section of industries including hedge funds, real estate investment partnerships, publicly traded partnerships, and large law firms.
  • Audits of the 60 largest corporate taxpayers, with average assets of $24 billion.  
  • And a new regulatory initiative to close a major tax loophole exploited by large, complex partnerships that could raise more than $50 billion in revenue over 10 years. 

In addition to enhancing tax fairness, these initiatives will narrow the gap between taxes owed and taxes paid, reducing the deficit. New Treasury and IRS analysis shows these investments in high-end enforcement, technology, and data resulting in $851 billion in additional revenue over the next decade if the investments in the Inflation Reduction Act are continued as President Biden has proposed. 

These enforcement initiatives are consistent with Secretary Yellen’s commitment to not increase audit rates relative to current levels for Americans making less than $400,000 a year. 


Treasury Sanctions Tren de Aragua as a Transnational Criminal Organization

Washington — Today, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) sanctioned Tren de Aragua, a Venezuela-based transnational criminal organization that is expanding throughout the Western Hemisphere and engaging in diverse criminal activities, such as human smuggling and trafficking, gender-based violence, money laundering, and illicit drug trafficking.

“Today’s designation of Tren de Aragua as a significant Transnational Criminal Organization underscores the escalating threat it poses to American communities,” said Under Secretary for Terrorism and Financial Intelligence Brian Nelson. “As part of the Biden-Harris Administration’s efforts to target Transnational Criminal Organizations, we will deploy all tools and authorities against organizations like Tren de Aragua that prey on vulnerable populations to generate revenue, engage in a range of criminal activities across borders, and abuse the U.S. financial system.”


From its origins as a prison gang in Aragua, Venezuela, Tren de Aragua has quickly expanded throughout the Western Hemisphere in recent years. With a particular focus on human smuggling and other illicit acts that target desperate migrants, the organization has developed additional revenue sources through a range of criminal activities, such as illegal mining, kidnapping, human trafficking, extortion, and the trafficking of illicit drugs such as cocaine and MDMA. 

Tren de Aragua poses a deadly criminal threat across the region. For example, Tren de Aragua leverages its transnational networks to traffic people, especially migrant women and girls, across borders for sex trafficking and debt bondage. When victims seek to escape this exploitation, Tren de Aragua members often kill them and publicize their deaths as a threat to others. 

As Tren de Aragua has expanded, it has opportunistically infiltrated local criminal economies in South America, established transnational financial operations, laundered funds through cryptocurrency, and formed ties with the U.S.-sanctioned Primeiro Comando da Capital, a notorious organized crime group in Brazil.

Tren de Aragua was sanctioned today pursuant to Executive Order (E.O.) 13581, as amended by E.O. 13863, for being a foreign person that constitutes a significant transnational criminal organization.  

Additionally, the U.S. Department of State announced reward offers totaling up to $12 million for information leading to the arrest and/or conviction of several Tren de Aragua leaders for conspiring to participate in, or attempting to participate in, transnational organized crime.


As a result of today’s action, all property and interests in property of the designated entity that are in the United States or in the possession or control of U.S. persons must be blocked and reported to OFAC. In addition, any entities that are owned, directly or indirectly, 50 percent or more by one or more blocked persons are also blocked. Unless authorized by a general or specific license issued by OFAC, or exempt, OFAC’s regulations generally prohibit all transactions by U.S. persons or within (or transiting) the United States that involve any property or interests in property of designated or otherwise blocked persons. U.S. persons may face civil or criminal penalties for violations of OFAC’s regulations.

View more information on the entity designated today.


OCC Amends Enforcement Action Against Citibank, Assesses $75 Million Civil Money Penalty

WASHINGTON—The Office of the Comptroller of the Currency (OCC) today issued an amendment to its October 7, 2020, Cease and Desist Order against Citibank, N.A, Sioux Falls, South Dakota, related to deficiencies in enterprise-wide risk management, compliance risk management, data governance, and internal controls (2020 Order).

The amendment is based on the bank’s failure to meet remediation milestones and make sufficient and sustainable progress towards compliance with the 2020 Order. It was issued to ensure Citibank prioritizes the remediation work, including through the allocation of sufficient resources.

The amendment supplements but does not replace the 2020 Order, which remains in full force and effect.

“Citibank must see through its transformation and fully address in a timely manner its longstanding deficiencies,” said Acting Comptroller of the Currency Michael J. Hsu. “While the bank’s board and management have made meaningful progress overall, including taking necessary steps to simplify the bank, certain persistent weaknesses remain, in particular with regard to data. Today’s amendment requires the bank to refocus its efforts on taking necessary corrective actions and ensuring appropriate resources are allocated for this purpose.”

The OCC also assessed a $75 million civil money penalty against Citibank based on the bank’s violations of the 2020 Order and lack of processes to monitor the impact of data quality concerns on regulatory reporting.

The Federal Reserve Board took a separate but related action against Citigroup, the bank’s holding company.

The OCC penalty will be paid to the U.S. Treasury.

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Acting Comptroller Discusses Importance of Addressing Financial Fraud

WASHINGTON—Acting Comptroller of the Currency Michael J. Hsu today discussed ways banks can assist their customers in avoiding fraud and scams in remarks during the Financial Literacy and Education Commission’s Public Meeting.

In his written remarks, Mr. Hsu acknowledged the range of frauds and scams that result in significant annual losses to consumers and businesses. He further discussed efforts banks can take to inform their customers about scams and to implement strong controls to build and maintain consumer trust.

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READOUT: U.S. Department of the Treasury Hosts Roundtable with Consumer Groups and Industry Representatives on Title Insurance

WASHINGTON – Today, the Federal Insurance Office (FIO) at the U.S. Department of the Treasury hosted a roundtable discussion with representatives from the financial services sector and consumer groups to discuss the title insurance industry and analyze potential reforms, as part of the Biden administration’s efforts to lower costs for homebuyers.

Title insurance is a product offered by commercial insurers to mitigate title defects and address disputes concerning property ownership and priority of the mortgage lender’s interest arising after closing. Lenders generally require that such insurance be obtained and paid for in connection with closing residential mortgage transactions. 

Senior Treasury officials led discussions that addressed the structure of the title insurance industry, the costs and benefits of title insurance, consumer awareness and protection, and various proposals for reforms to lower costs for homebuyers. Participants in the roundtable included representatives of groups that advocate for consumers and housing access, as well as title insurers and agents, lenders, state insurance regulators, academics, and other stakeholders.

FIO was tasked with convening the roundtable in connection with President Biden’s call for federal agencies to take all available actions to lower home closing costs and help more Americans access homeownership.

Among its other statutory duties, FIO monitors the extent to which traditionally underserved communities and consumers, minorities, and low- and moderate-income persons have access to affordable insurance products; advises the Secretary of the Treasury on major domestic insurance matters; and consults with state insurance regulators regarding insurance matters of national importance. Today’s roundtable will assist FIO in its work as it continues to consider policy options with regard to title insurance.


READOUT: Secretary of the Treasury Janet L. Yellen’s Meeting with Foreign Minister Israel Katz of Israel

WASHINGTON – Secretary Yellen met with Israeli Foreign Minister Israel Katz today, on the sidelines of the NATO Summit in Washington DC. Secretary Yellen reaffirmed Treasury’s strong commitment to Israel’s security. Secretary Yellen also emphasized the need for Israel to maintain economic stability in the West Bank by regularly transferring clearance revenues to the Palestinian Authority and ensuring that correspondent banking relations between Israeli and Palestinian banks remain uninterrupted. Secretary Yellen also raised Treasury’s February Executive Order 14115, holding individuals and entities accountable for perpetrating, inciting, or financially supporting violence throughout the West Bank. 

During the meeting, Secretary Yellen outlined Treasury actions to disrupt Iran and its proxies including Hizballah and Hamas. Secretary Yellen welcomed additional information sharing with Israel and noted that ongoing collaboration to combat terrorist financing has yielded fruitful results with respect to countering Iranian financial and military support to Hamas, Hizballah, and its other regional partners and proxies.


Remarks by Under Secretary for International Affairs Jay Shambaugh on Chinese Overcapacity and the Global Economy

As Prepared for Delivery 

Thank you, Rush, for the kind introduction.  And thank you to Mike Froman and the Council on Foreign Relations for hosting me.

Few topics are a greater priority today – for the Biden administration in general and the U.S. Treasury in particular – than our economic engagement with China.  Underlying our responsible management of the economic relationship and our goal of a healthy economic competition is the belief that we needed to enhance communication, especially in areas where we disagree – something President Biden made clear after his meeting with President Xi in late 2022.  In a speech last year at SAIS, Secretary Yellen laid out three principal objectives for our economic approach to China: first, securing U.S. national security interests and protecting human rights; second, seeking a healthy economic relationship with a level playing field; and third, cooperating in areas where we can and must, such as climate change.  As U.S. lead for the Economic Working Group between the U.S. and China, I have spent many hours in discussions with Chinese counterparts toward achieving these three objectives. 

Today, I will focus on the second of these objectives: our pursuit of a healthy economic relationship between the U.S. and China with a level playing field for American workers and firms.  Such a relationship could be beneficial to both sides.  But we are growing concerned that China’s enduring macroeconomic imbalances and non-market policies and practices pose a significant risk to workers and business in the United States and rest of the world.  We are worried these features of China’s economy can lead to industrial overcapacity that has significant spillovers around the world and can compromise our collective supply chain resilience given the resulting over-concentration in some manufacturing sectors.   

Let me be clear – we remain fully supportive of trade, which obviously includes countries exporting goods they produce.  But overcapacity is something different: it is not just production in excess of domestic demand, it is production capacity untethered from global demand. 

Overcapacity concerns and interventions are not new – but we are seeing a resurgence of risks in new sectors. Earlier rounds of overcapacity led to job losses in the United States and shuttered American firms.  Given China’s size today, spillovers from its economy will be even more consequential. 

That is why today I want to discuss what overcapacity is, what Chinese policies cause it, where are we seeing it, the potential global spillovers, and how we should respond.

China’s Macroeconomic Imbalances and Global Spillovers

As an international macroeconomist, I have studied the economic relationship between the United States and China for decades – both as an academic and as a policy official.  And throughout this time, perhaps the defining characteristic of this relationship has been macroeconomic imbalances and their effects. 

Take, for example, China’s savings rate. China has maintained an exceptionally high savings rate for decades and over the past 20 years it has been roughly 45 to 50 percent of GDP.  That is more than twice the historical OECD average and about 10-20 percentage points above comparator East Asian economies.  China comprises 28 percent of total global savings, while only 18 percent of global GDP.  The corollary of high savings is low levels of household consumption.  At less than 40 percent of GDP, China’s consumption is low relative to other countries at similar levels of income. 

It is textbook economics that these savings must be channeled somewhere, which leaves the Chinese economy reliant on a combination of domestic investment and foreign demand to drive growth.  The mix between these two factors has fluctuated over time.  Twenty years ago, China relied on foreign demand and had large growing current account surpluses.  In the last decade, Chinese investment in infrastructure and real estate has absorbed much of the savings.  But the recent downturn in China’s property sector and the underperformance of its domestic economy raises questions about the drivers of future growth – and, in particular, China’s likely reliance on foreign demand to sustain its growth going forward. 

When China relies on foreign demand for growth, and especially when sectoral trade surpluses grow rapidly, the resultant loss of jobs and reduced wages can create lasting and significant damage to individuals and communities around the world, particularly those with low incomes.  We are all familiar with the so-called “China shock” that has hit workers and businesses not only in America but across the globe.  For example, from 2008 to 2013, China’s push in solar panel manufacturing contributed to an 80 percent decline in international prices and led to bankruptcies and firm closures in the United States and Europe, while Chinese solar output continued to expand on the back of $18 billion in below-market loans.[1]  In the steel sector, from 2000 to 2015, China added over eight hundred million tons of steelmaking capacity, and Chinese production volume eclipsed the total volume produced by the rest of the world.[2]  When Chinese consumption stalled but production did not, this depressed prices to record lows, reduced utilization rates of foreign steel producers, and contributed to the loss of nearly 100,000 jobs in the U.S alone.[3] 

Now, China’s economic size exacerbates this challenge.  A 3 percent current account surplus for China today would be almost the same share of global GDP as a 10 percent surplus back in 2007.  China cannot rely on global growth the way it did from 1990 to 2010; it is simply too big an economy today.  China’s share of global manufacturing is already 30 percent.  As seen in Figure 1, China’s manufacturing trade surplus as a share of world GDP is large and has risen rapidly, at almost 2 percent.  That is more than the combined share of Japan and Germany’s manufacturing surpluses at their peaks. 

Chinese policymakers’ clear preference today is to push manufacturing even further as China’s growth driver, which means taking on an increasingly outsized share of global production – with other countries’ manufacturing sectors needing to shrink to compensate.

China’s size means that its imbalances pose an even greater risk to the global economy.  A small economy exports at the world price, but a large one – especially with a dominant market position – can shift global prices and leave the rest of the world to deal with the consequences.  When Chinese production is growing faster than its own demand or that of the global economy, the rest of the world cannot absorb China’s increase in manufacturing production without being forced to adjust.  These conditions would not appear in a normal, market economy.  What we are seeing is a fundamental distortion, driven by government policy.

Imbalances and Overcapacity

China’s large imbalances have spillovers on their own, but China’s non-market policies and practices amplify this effect by distorting markets, undercutting fair competition, and concentrating the spillovers into certain sectors.  In particular, the combination of China’s enduring macroeconomic imbalances and large-scale government support to specific industrial sectors drive industrial overcapacity. 

The scale of this support is striking: China’s industrial subsidies are simply much larger than those of other countries.  The Center for Strategic and International Studies concludes that China spends roughly 5 percent of GDP on industrial subsidies, 10 times as much as the United States, Brazil, Germany, and Japan.[4]  In sectors like semiconductors, steel, and aluminum, China alone accounts for between 80 and 90 percent of global subsidies provided to those industries.[5]   China’s subsidies are opaque but emerging patterns suggest the size of subsidies in China is only increasing, especially at local and provincial levels.  State-supported investment is surging to strategically important industries and companies, and there are new tools to steer commercial activities, including the use of structural monetary policy tools to advance industrial policy objectives. The central government, local governments, state-owned firms, and the private sector all play a key role in furthering the government’s industrial policy agenda.  

Notably, “Government Guidance Funds” or “Government Investment Funds” continue to use public resources to make equity investments in industries and activities that the Government considers important, with very limited transparency.  Academic studies estimate these funds have provided more than $1 trillion in capital and guarantees to over 28,000 mostly private companies from 2000 to 2018.[6]  One of these government guidance funds – of which there are over 2,000 at the national and subnational levels – specifically targets the semiconductor sector and is larger than the entire CHIPS & Science Act.  Other large-scale initiatives, including the “Little Giants” and “Single Champion”, demonstrate that China’s private sector does not solely operate through market forces – but rather benefit from the network of government guidance funds, state-owned banks, and SOEs who serve as financiers and customers to private firms.

These practices channel China’s vast savings into certain sectors, as directed by Beijing.  China’s “Made in China 2025” was launched in 2015 to promote certain strategic sectors.  As seen in Figure 2, China has successfully promoted the exports of and discouraged imports of “strategic sectors” as defined by the 2015 policy, with notable results.  Imports have been falling as a share of China’s economy, but even more in strategic sectors.  And, while non-strategic sector exports fell as a share of China’s economy, exports in strategic sectors grew. 

Today, China’s push on manufacturing to drive growth is translating to an apparent surge in lending to industrial sectors, mirroring a decline in lending to real estate sectors (Figure 3).  At the same time, growth in China’s export volumes is rising faster than total export values (calculated in USD), rising 11.5% versus 1.5%, respectively, in the first quarter of 2024 compared to the previous year.  Increases in export volume were particularly high for electric vehicles (+20%), solar batteries (+30%), and semiconductors (+25%), while overall export prices have fallen significantly since the beginning of 2023.  

In today’s interconnected economy, such overcapacity can also lead to the concentration of supply chains in ways that ultimately reduce economic resilience.  As evidenced by the personal protective equipment (PPE) supply chain disruptions during the pandemic, significant concentrations of supply chains in a single country increases the risks of disruptions.  We see sectors such as solar panel manufacturing, critical minerals processing, permanent magnets, that are heavily concentrated in China. This is not just an issue for the United States or other advanced economies, emerging markets have seen their import concentration from China increased in recent years.[7]

Defining Overcapacity

But what do we as policymakers mean when we talk about Chinese overcapacity?  Defined most simply, it is production capacity in excess of domestic demand and untethered from global demand – and we are concerned about the patterns of overinvestment and state support driving it.  While periodic surpluses can occur within natural business cycles, we are concerned about structural overcapacity, which stems from persistent patterns of overinvestment and is facilitated by extensive state support.

There is no single test or condition that indicates overcapacity.  We cannot simply put in a few statistics about a sector and get a thumbs up or down of whether overcapacity exists.  Instead, I will outline three sets of indicators, or “warning signs.”  

The first metric is whether expansion in production capacity is growing faster than even the most ambitious demand projections.

The second is rate of lossmaking and inefficient firms.  The widespread presence of such firms reflects limited or slow adjustment to changing market conditions and a deteriorating ability to translate investment into revenue.  Rising production and investment alongside these indicators would suggest overcapacity. 

And third, low or sharply declining capacity utilization rates.  Sustained low utilization rates strain profitability of firms and imply the existence of surplus capacity. 

None of these metrics are definitive or dispositive on their own, and overcapacity can exist without some of these indicators. For example, with enough subsidies, capacity utilization might be quite high despite excess production.  But together they provide an analytical foundation for identifying overcapacity.  And on each metric, we are seeing persuasive evidence of not only Chinese overcapacity, but the clear link to the policies driving it. 

In China’s case, sectoral conditions are exacerbated by non-market policies and practices, which break the link between company behavior and market forces, and enable these companies to sell goods overseas at prices that are below what their market-driven competitors are able to offer.  This then enables the company that has benefited from such government support to grow their market share, potentially leading to over-concentration on a few suppliers. 

  1. Supply rising faster than any plausible level of global demand

First, in certain sectors, Chinese capacity is rising faster than any plausible level of global demand (Figure 4).  

For example, China’s production capacity in lithium-ion batteries and solar modules is set to exceed projected global demand by 2 to 3 times over the next few years compared to what is necessary to achieve a path to net-zero emissions by 2050.[8]  Similarly, China’s planned production capacity for EVs in 2030 is set to reach over 70 million vehicles, while global EV sales are estimated to only reach 44 million in that year. [9] These figures rely heavily on projections of future supply and demand, which may change.  We are assuming that demand will not rise more rapidly than needed under net-zero scenarios.  If global prices were to decline due to falling Chinese export prices, demand for Chinese goods would rise, but such low prices would likely eliminate production outside China.

2. More lossmaking and inefficient firms

Second, though the presence of lossmaking firms and low returns to investment can be natural in new or transforming industries, the presence of lossmaking firms in China is found even among mature industries.  Firms losing money should go out of business, not continue producing and adding to supply. But, if subsidies or other support from government (including local governments loathe to see an industry leave its borders) prop the firm up, it can stay in business far longer.

The share of lossmaking industrial firms in China is at its highest level in recent years, and the total number of lossmaking industrial firms is at its highest point since the 1990s, as seen in Figure 5.[10]  Further, indicators of capital efficiency have declined over the past ten years across all sub-sectors with available data (Figure 6). 

Lossmaking is especially pronounced in China’s auto industry.  The share of publicly-traded loss-making firms in the auto industry was 28 percent, outpacing the economy-wide average of 20 percent in 2022.  Within the subset of Chinese EV manufactures, only a handful are currently profitable, and these few firms are now facing intense margin pressure.[11]

3. Low or Declining Capacity Utilization

And the third metric is low or declining rates of capacity utilization.  Of course, capacity utilization rates can fluctuate with the business cycle, but that cannot fully explain the consistently low rates seen in many of the Chinese manufacturing sectors.  Data from the first quarter of 2024 shows China’s manufacturing capacity utilization rate has fallen to its lowest point since 2016 at 73.8% (Figure 7), while the capacity utilization rate of OECD countries typically has remained around 80%.[12]  

This decline was particularly pronounced for sectors that Beijing prioritizes, including in automobiles, solar panels, and semiconductors (Figure 8).  Utilization rates for finished solar panel production tumbled to 23% in February 2024, down from more than 60% a year earlier.[13] And the IEA estimates that last year, China’s battery output was less than 50% of total production capacity.[14]

For cars, China’s capacity utilization rates have exhibited a consistent downward trend since its 2017 peak of nearly 85% and fell to 65% in the first quarter of 2024, even while auto production increased.[15]  While top companies such as BYD are reportedly operating at above 80%, analyst reporting showed the average capacity utilization rate for new energy vehicles in 2023 was less than 50%.[16]

China’s Actions and Counter Argument

Some Chinese officials have argued publicly that other economies have production in excess of domestic demand and this is a normal part of trade.  As I said earlier, our concern is not about exports or even Chinese firms having a comparative advantage in some areas.  It is that the breadth of China’s government support means that production does not respond to global market demand.  The United States and many other market economies have successful export sectors, but our firms have incentives to respond to market signals.  During a global downturn, adjustment falls first and foremost on market economies. 

Chinese firms guided and supported by the government will expand production, face domestic market saturation, and then resort to exporting excess production at below-market prices.  Chinese production is also less responsive during a downturn. Rather than decreasing production or undergoing industry consolidation, Chinese industries can often maintain production, pushing excess supply abroad.  In both cases, the results are similar: overcapacity distorts global prices, threatens the long-term viability of foreign competitors, and shifts adjustment onto foreign countries, advanced and developing economies alike.  Another helpful indicator of overcapacity is how other countries are responding.  Rising cases of antidumping being brought against firms from a particular country may suggest that its firms are selling at prices below cost or normal market conditions. 

Chinese government support comes from a broad range of government bodies.  We have seen time and time again examples of Beijing announcing a new priority, and then the state actors across the country rushes to support it.  This will mean central government, provincial, or city-level support, amplified by state owned banks, for that locality’s specific champion or champions, leading to a rapid and broad-based expansion of production in that politically important sector.

Tools for Responding to Overcapacity Concerns

China’s imbalances and their spillovers have not gone unnoticed – Secretary Yellen has consistently raised China’s unfair economic practices and overcapacity concerns with her counterparts, from her first visit to Beijing last year to their recent meetings in April.  The Biden Administration has taken important steps to level the playing field, using a range of tools to protect American manufacturers who are subject to unfair and heavily subsidized competition.  This includes ongoing diplomatic engagement with Chinese counterparts, including through the Economic Working Group; historic investments under the CHIPS Act, the Bipartisan Infrastructure Law, and the Inflation Reduction Act; and trade enforcement, including the revised Section 301 tariffs or actions involving anti-dumping or countervailing duties.

The results of the Section 301 review outlined strategic and targeted steps that are needed to respond to specific long-standing unreasonable trade practices related to forced technology transfer by China.  In crafting the tariff regime to achieve this objective, President Biden directed USTR to raise tariffs on $18 billion of imports in sectors where we are looking to preserve and increase supply chain resilience and protect American workers in the face of unfair Chinese production.  Along with our interagency colleagues, we will continue to monitor and respond to China’s use of non-market policies and practices and use the tools at our disposal to secure fair competition. 

We are not isolated in seeking to address negative spillovers from China’s non-market practices.  The EU and Turkey have also recently imposed tariffs on Chinese EV imports; Mexico, Chile, and Brazil have taken trade actions on Chinese steel; and India uses tariffs and other trade tools to defend its solar manufacturers from Chinese dumping.  And while each country had their own concerns and needs, the underlying reason is undeniable. As the G7 Leaders and Finance Ministers have stated – China’s overcapacity “undermines our workers, industries, and economic resilience and security.”  The United States will act, and we won’t be alone.


Let me conclude with a broader perspective. 

First, overcapacity concerns are not new, and China is not blind to them.  In the past, China has acknowledged excess capacity in several industries, including steel, cement, and glass.  And more recently, Chinese officials have publicly acknowledged overcapacity as a risk to sustained economic recovery during their Congress’s annual meetings in March and their Central Economic Work Conference last December. Continued production beyond what a market can bear is an inefficient waste of resources.  Reigning in overcapacity could be good for China, boosting productivity and efficiency.  However, their efforts from prior years to address overcapacity in a small number of sectors are being reversed, and overcapacity is clearly growing.

Second, this a global issue. The United States, along with our allies and partners in developing economies and advanced economies alike, share mutual objectives to address China’s policies that have negative economic spillovers to our firms, workers, and economic resilience. 

Third, addressing these challenges may warrant our taking defensive action to protect our firms and workers – and the traditional toolkit of trade actions may not be sufficient. More creative approaches may be necessary to mitigate the impacts of China’s overcapacity. We should be clear: defense against overcapacity or dumping is not protectionist or anti-trade, it is an attempt to safeguard firms and workers from distortions in another economy.

The best outcome, though, would be for China to acknowledge the growing concerns among its major trading partners and work with us to address them. We will take defensive action if needed, but we would prefer for China to take action itself to address the macroeconomic and structural forces that are generating the potential for a second “China shock” for its major trading partners. China could boost consumption by strengthening its safety net, increasing household incomes, reforming its internal migration rules. It could better support services, not just manufacturing. It could reduce harmful and wasteful subsidies. These would all be in China’s interest and reduce tensions.

As I described earlier, the Treasury Department has shared these concerns through regular engagements with our Chinese counterparts. We have advocated for specific steps to ensure American workers and firms are treated fairly, and we will continue to work bilaterally toward a healthy economic relationship that benefits both countries.

Thank you.


[1] Suntech, Owing Millions, Faces a Takeover. NYT, March 2013.

[2] World Steel Association.

[3] Bureau of Labor Statistics.

[4] Red Ink: Estimating Chinese Industrial Policy Spending in Comparative Perspective (, and Big Spender – The Wire China

[5] Government support in industrial sectors: A synthesis report | en | OECD

[6] Government as an Equity Investor: Evidence from Chinese Government Venture Capital through Cycles by Jinlin Li :: SSRN

[7] Rhodium Group, How China’s Overcapacity Holds Back Emerging Economies

[8] BloombergNEF

[9] China’s EV overcapacity spurs global fears of more price cuts – Nikkei Asia

[10] National Bureau of Labor Statistics.

[11] Li Auto Profit Fell on Higher Operating Expenses.  WSJ, May 2024

[12] China National Bureau of Statistics, Trading Economics.

[13] China solar industry faces shakeout, but rock-bottom prices to persist | Reuters

[14] Global EV Outlook 2024 (, pg.81. 

[15] CEIC via Haver

[16] China’s underutilized factories fan export dump fears in U.S. and Europe – Nikkei Asia.

Figure 1. 

Manufacturing Goods Surplus (% of World GDP)

Figure 2. 

Made in China 2024 Change to China's Imports/Exports

Figure 3. 

Year-over-year Change in Gross Lending (RMB Trillion)

Figure 4. 

Global Demand Compared to China Supply

Figure 5 

Percent of Loss-Making Firms: Industrial Enterprises

Figure 6 

 Change in Lossmaking (y-axis) and Fixed Asset Turnover (x-axis) since 2010

Figure 7 

 Change in Lossmaking (y-axis) and Fixed Asset Turnover (x-axis) since 2010

Figure 8 

Year-over-year Change in China's Capacity Utilization Rate (Q1 2023 vs. Q1 2024, pp)



OCC Renews Mutual Savings Association Advisory Committee Charter, Seeks Nominations

WASHINGTON—The Office of the Comptroller of the Currency (OCC) has renewed the charter of its Mutual Savings Association Advisory Committee (MSAAC) and seeks nominations for its members.

The MSAAC provides advice and information to the Comptroller of the Currency on the condition of mutual savings associations, the regulatory changes or other steps the OCC may be able to take to ensure the health and viability of mutual savings associations, and other issues of concern to mutual savings associations. The committee includes officers and directors of federal mutual savings associations of all types, sizes, operating strategies, and geographic areas, as well as from federal savings associations in a mutual holding company structure.

The OCC is seeking nominations of individuals who are officers and/or directors of federal mutual savings associations, or federal stock savings associations that are part of a mutual holding company structure, to be considered for selection as MSAAC members.

Nominations must be received on or before August 26, 2024.

Nominations of MSAAC members should be sent to [email protected] or mailed to: Michael R. Brickman, Deputy Comptroller for Specialty Supervision, 400 7th Street, SW., Washington, DC 20219.

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