GUANGZHOU, China, April 4 (Reuters) - U.S. Treasury

Secretary Janet Yellen arrives in China's southern factory hub

of Guangzhou on Thursday with a tough message to Chinese

officials: you're producing too much of everything, especially

clean energy goods, and the world can't absorb it.

China is unleashing a flood of electric vehicles (EVs),

batteries, solar panels, semiconductors and other manufactured

goods onto global markets, the result of years of massive

government subsidies and weak demand at home. Global prices for

many goods are tanking, pressuring producers in other countries.

"We see a growing threat of money losing firms that are

going to have to sell off their production somewhere," a senior

U.S. Treasury official said of overproduction in key Chinese

sectors.

In a series of meetings with top Chinese economic officials

from Friday through Monday, Yellen will seek to convey her view

that the excess production is unhealthy for China and that there

is a growing drumbeat of concern about it in the U.S., Europe,

Japan, Mexico and other major economies.

The official, who spoke on condition of anonymity, added

that Yellen would explain: "If there are trade actions around

the world, it's not an anti-China thing, it's a response to

their policies."

But Beijing appears to be doubling down on investing in more

manufacturing capacity in favored high-technology sectors, a

stance that also is increasingly at odds with the European

Union, Japan, Mexico and other major economies.

"I do think the stage is set for renewed tensions with

China," said Brad Setser, a former trade official at both the

U.S. Treasury and the U.S. Trade Representative's office. "It's

an intrinsic question whether other countries want to import

China's distortions."

Setser added that Yellen's warnings about Chinese

overproduction may be an initial step by the Biden

administration towards new tariffs or other trade barriers on

Chinese EVs, batteries and other goods.

En route to Guangzhou, Yellen declined to say whether she

would raise the threat of new tariffs in her meetings in

Guangzhou and Beijing with Chinese Vice Premier He Lifeng and

Guangdong Province Governor Wang Weizhong, who has also presided

over hundreds of billions of dollars worth of recent new

projects.

But she said that the Biden administration was determined to

develop American supply chains in EVs, solar power and other

clean energy goods with investment tax credits and would not

"rule out other possible ways in which we would protect them."

In March, China's leadership pledged to follow through on

President Xi Jinping's new mantra of unleashing "new productive

forces" in China by investing in developing technology

industries including EVs, new materials, commercial spaceflight

and life sciences - areas where many U.S. firms hold advantages.

FACTORY FIRST

The results of China's prior investment binges are

staggering.

Including EVs and combustion-engine cars, China by the end

of 2022 had the capacity to produce 43 million vehicles

annually, but its plant utilisation rate - a measure closely

linked to profitability - was just under 55%, according to data

from the China Passenger Car Association.

Bill Russo, the Shanghai-based founder and CEO of advisory

firm Automobility, estimated that this translates to excess auto

production capacity of about 10 million vehicles a year, or

roughly two thirds of North American auto output in 2022.

The Rystad Energy research group estimates that China will

soon be able to meet all global demand for lithium-ion vehicle

batteries, even as dozens of battery and component plants spring

up across the U.S.

And new entrants are still coming into an increasingly

cut-throat Chinese EV market. Mobile phone maker Xiaomi ( XIACF ) on

Tuesday launched sales of its sporty new Speed Ultra 7 (SU7) EV.

SOLAR DOMINANCE

The situation in China's solar panel sector may be worse,

where overproduction pushed prices down 42% last year to levels

60% below the cost of comparable U.S.-made products. China now

accounts for 80% of global production capacity, and major solar

producers are continuing to build factories, backed by

provincial and local subsidies.

At the end of 2023, China had the capacity to build 861

gigawatts of solar modules per year, more than double the global

total installed capacity of 390 million gigawatts. Another

500-600 gigawatts of annual capacity is forecast to come online

this year -- enough to supply all global demand through 2032,

according to energy research firm Wood Mackenzie.