Yellen Heads to China This Week Advancing US Bid to Fix Ties

Viktoria Dendrinou
·5 min read
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(Bloomberg) -- US Treasury Secretary Janet Yellen will travel to Beijing on July 6-9, becoming the second member of Joe Biden’s cabinet to head to the Chinese capital in recent weeks, as the world’s two largest economies look to mend ties after a spate of bilateral tensions.

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Yellen’s trip will take place just three weeks after Secretary of State Antony Blinken visited China, highlighting the efforts by the Biden administration to reinstate lines of communication with counterparts in Beijing.

The trip announcement ends months of speculation over when — and whether — the top US economic policymaker would head to Beijing. The Treasury chief has said for months she intends to visit, but an escalation in tensions stemming from then-House Speaker Nancy Pelosi’s trip last year to Taiwan — which Beijing claims as part of China — and the flight of a Chinese balloon over the US left the plans in limbo.

China’s Ministry of Finance confirmed the visit in a statement on Monday.

In Beijing, Yellen will meet with senior Chinese government officials to discuss the importance of responsibly managing the US-China relationship, communicating directly about areas of concern, and working together to address global challenges, the Treasury Department said.

While a senior Treasury official didn’t say which government representatives Yellen will be meeting with in Beijing, they said she was not expected to meet with Chinese President Xi Jinping.

Trip Objectives

The official said that through this trip, the US will seek to deepen and increase the frequency of communication between the two countries, stabilize the relationship, avoid miscommunication and expand collaboration where possible.

A key priority for the Treasury with China has been pressing Beijing to boost debt relief for developing nations in distress. Yellen’s visit will follow a recent agreement in principle for Zambia, which she has praised.

The Treasury chief may face questions from her counterparts on the Biden administration’s plans to regulate and potentially cut off US corporate investment in China in sensitive technologies.

In Beijing, Yellen plans to convey US concern and press for corrective action on areas like coercive actions and nonmarket economic practices used by China, the Treasury official said.

The Treasury doesn’t expect significant breakthroughs stemming from this initial travel, the official said. Rather, it hopes to build longer-term channels of communication with the Chinese government’s new economic team and more regularly discuss issues in the bilateral economic relationship.

Consultations between top economic officials typically involve comparing notes on the outlooks for growth, and Yellen will have the opportunity to get Chinese authorities’ assessment of recent data that have spurred private economists to downgrade their estimates. By contrast, resilient US growth and elevated inflation have spurred expectations for further Federal Reserve tightening — a dynamic that’s sent the dollar higher against China’s yuan.

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Yellen’s trip comes days after the People’s Bank of China appointed long-serving technocrat Pan Gongsheng as its Communist Party chief, indicating the central bank will stay with its recent approach of modestly cutting interest rates.

Wu Xinbo, dean of the Institute of International Studies at Fudan University, said that while Yellen cannot address contentious trade issues such as tariffs or sanctions, which are the purview of US Commerce Secretary Gina Raimondo, she is seen as a “rational voice” inside the Biden administration.

“This is why we want to receive her as the first member of the US economic and trade team to visit China,” Wu added, on the sidelines of the World Peace Forum in Beijing, saying she can “create room for easing bilateral economic and trade relations.”

Diminished Ties

US-China engagement today is a shadow of what it once was. The Treasury secretary at one point would meet with China’s equivalent every six months, through the “Strategic Economic Dialogue,” but such forums became defunct in the Trump administration — which levied a raft of import tariffs on Beijing.

Both Yellen and top White House officials in recent months have sought to stress that the US is not seeking to decouple from its geopolitical rival but rather de-risk. Even so, in an April speech she warned that the US is prepared to accept economic costs in order to protect national-security interests from threats posed by China.

Yellen’s new counterpart in Beijing is Vice Premier He Lifeng, a longtime confidant of President Xi. He succeeds Liu He — a fluent English-speaking veteran of the international stage who had studied at Harvard University. When Yellen and Liu met in January in Zurich, their rapport was such that they at one point left their aides behind as they kept talking. Analysts will be keen to monitor the new Yellen-He dynamic.

Among other potential issues in the upcoming talks: a recent crackdown by China on access to information about its companies, and continuing questions about prospects for Chinese firms listing on US exchanges. For their part, Chinese leaders have been continuously emphasizing that their country welcomes overseas firms.

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“They’ve got some economic challenges and I think they want to make sure that they maintain a climate for foreign investment that is positive,” Yellen said in a recent interview.

As for a bilateral summit, President Joe Biden said in mid-June he anticipated meeting with Xi in the next several months. The two met in Indonesia in November during the Group of 20 summit.

(Updates with Ministry of Finance statement in the fourth paragraph.)

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