WASHINGTON, April 2 (Reuters) - U.S. Treasury Secretary

Janet Yellen will return to China this week to continue her

economic dialogue with top Chinese officials amid a new emphasis

on the global threat posed by the Asian superpower's growing

excess industrial capacity, the Treasury Department said on

Tuesday.

The April 3-9 trip, which will be Yellen's second in-person

visit to China since July 2023, will include a stop in the

southern factory hub of Guangzhou before Beijing.

U.S. President Joe Biden and Chinese President Xi Jinping

are scheduled on Tuesday to hold their first direct talks since

November, in a call in which the U.S. leader will seek to ease

tensions over Taiwan's presidential inauguration in May.

Biden administration officials said that both Biden and

Yellen will be emphasizing the need for China to create a "fair

and level playing field" for U.S. workers and companies.

In Guangzhou, Yellen will meet with Chinese Vice Premier He

Lifeng, Guangdong Province Governor Wang Weizhong and executives

of U.S. companies in China, the Treasury Department said. She

will hear first-hand about business climate challenges that are

prompting U.S. firms to limit their investment in China.

Yellen last met with He, her main Chinese economic

counterpart, in November 2023, ahead of the Asia-Pacific

Economic Cooperation Summit in San Francisco, where Biden also

met with Xi.

Since Yellen's first visit to Beijing last July, she and He

have launched economic and financial working groups that meet

virtually. The dialogue so far has been largely focused on

discussing key economic issues facing each country and their

respective policy responses, such as the property market

troubles in China that have undermined consumer confidence, or

the failures of two major U.S. regional banks last year.

U.S. Treasury officials also have used the dialogue to

explain that U.S. national security restrictions on

semiconductors and U.S. investment into China will be narrowly

targeted.

CAPACITY CHALLENGE

The increased U.S. emphasis on Chinese excess capacity

represents a shift in the discussions at a time when China's

exports are growing amid weak demand at home. Xi has also

pledged to unleash "new productive forces" in China by investing

in developing technology industries including electric vehicles

(EVs), new materials, commercial spaceflight and life sciences.

Yellen said last week at a Suniva solar module factory near

Atlanta that Chinese government support has led to "substantial

overinvestment" in steel, aluminum and other industries, paving

the way for cheap exports that have forced manufacturing in

other, market-driven countries to contract.

"Now, we see excess capacity building in 'new' industries

like solar, EVs, and lithium-ion batteries," Yellen said during

her trip last week, adding that this was distorting prices and

production patterns and hurting workers in the U.S., European

Union and other economies.

Asked if she would raise the threat of new trade barriers on

her next China visit, Yellen said she did not want to "get into

retaliation," adding: "We want to see what we can do that's

constructive."

The EU is investigating whether China's EV industry is

benefiting from unfair subsidies, a probe that could lead to

tariffs to protect European carmakers. The U.S. Commerce

Department has opened a probe into whether Chinese vehicles pose

national security threats due to the data they transmit, and the

Biden administration is facing growing calls from lawmakers to

hike tariffs on Chinese EVs.

A U.S. Treasury official told reporters that Yellen during

her upcoming China trip would "make clear the global economic

consequences of Chinese industrial overcapacity undercutting

manufacturers in the U.S. and firms around the world."

The official, speaking on condition of anonymity, said U.S.

and Chinese officials would likely discuss currency matters as a

routine part of their economic talks, but declined to comment on

recent weakness in China's yuan currency.

The official added that Yellen would seek further

cooperation in areas mutually beneficial to both countries,

including fighting climate change, combating illicit financing

and narcotics trafficking and providing relief to

debt-distressed developing countries.