Yellen Says US-China Ties on ‘Surer Footing’ After Beijing Visit

Viktoria Dendrinou
·5 min read
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(Bloomberg) -- US Treasury Secretary Janet Yellen struck a positive but pragmatic tone after completing a high-stakes trip to China that aimed to reassure officials the US won’t hold back its biggest economic competitor.

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Yellen’s comments were delivered at a press conference capping a four-day visit to Beijing that she’d described as a mission to revive engagement between the two largest economies. Frictions between Washington and Beijing have tumbled into a tit-for-tat trade war with both sides restricting exports critical to advanced technologies.

The US Treasury chief emphasized the benefits of trade with China and said she’d stressed to skeptical officials in Beijing that “diversifying” supply chains in narrow areas wasn’t the same as decoupling. “This is something I am trying to communicate and believe very strongly myself,” she said. “I think that message was received.”

While in China, Yellen held 10 hours of talks that she described as “direct, substantive and productive,” and said had brought US-China ties closer to a “surer footing.” Half of that time was spent with her counterpart vice premier He Lifeng, the first extensive exchange between the two policy chiefs since China’s new economic team was appointed. During a shorter meeting with Premier Li Qiang, she had a broader exchange on the US-China relationship.

Yellen also met with China’s Finance Minister Liu Kun and exchanged views on the two countries’ economic situation and on responses to global challenges, according to Chinese state media.

A senior Treasury official said the visit had been successful and had given the US side a chance to hear the Chinese team’s thinking on their economy. The official added it was helpful to see how the new leaders interacted and it was clear they’d known President Xi Jinping for some time.

Yellen’s task in Beijing was a tricky one. She sought to air concerns about Chinese economic policies, while calling for greater cooperation and engagement between the two nations, especially on global challenges such as climate change and debt distress in poorer nations.

It was the first major test of a policy she outlined in April that’s geared toward defending and securing US national security without trying to hold China back economically.

During her trip, Yellen raised China’s “non-market” practices and “coercive actions” against American firms, and warned Chinese companies against providing material support for Russia’s war in Ukraine. China expressed its concerns about US sanctions and other restrictive measures.

Despite those pressure points, Yellen’s overall message was for both sides to manage their rivalry with a fair set of rules. “President Biden and I do not see the relationship between the US and China through the frame of great power conflict,” she said on Sunday. “We believe the world is big enough for both of our countries to thrive.”

Yellen said on CBS’s Face the Nation that she sees a path for the US to reduce inflation and also maintain a “healthy labor market,” though the risk of recession is “not completely off the table.”

Broader Push

Her visit to China was part of a broader push by President Joe Biden’s administration to mend relations with America’s main geopolitical rival and open more lines of high-level communication.

As part of that mission, Yellen met with Pan Gongsheng, who is expected to take over as governor of China’s central bank. The Treasury sowed confusion over whether Pan had already received that promotion by calling him “head” and “acting governor” of the People’s Bank of China, a title that China hasn’t used.

Yellen is the second member of Biden’s cabinet to visit China in three weeks, after Secretary of State Antony Blinken’s trip in June. Her efforts to narrow the scope of de-risking and identify “unproblematic” trade opportunities contrasted with a more combative tone by Blinken, who vowed in Beijing to protect “our critical technologies so that they aren’t used against us.”

Read more: Yellen’s China Trip Leaves Little Doubt Pan’s in Charge of PBOC

US climate envoy John Kerry is expected to visit later this month for talks on global warming, an area of mutual concern where Beijing and Washington could also find more common ground.

The Communist Party-backed Beijing Daily newspaper voiced doubts in a Friday editorial that such talks would improve relations.

“Every time there emerges some positive signs when the two sides restart dialogue, they’re extinguished by Washington’s suppression and containment of China in a blink of an eye,” wrote an unnamed author from a research center under the Central Committee’s International Liaison Department.

No Final Decisions

The relationship’s next test may come soon. Biden’s team is preparing an executive order curbing US outbound investment in China that could further restrict Beijing’s access to advanced technology.

Yellen said “no final decisions” had been reached on that action but pledged any new restrictions would be “highly targeted” toward a few sectors. “I wanted to allay their fears we would do something that would have broad-based impacts on the Chinese economy,” she added, referring to her Chinese counterparts.

Vice premier He warned the US on Saturday that “generalizing national security” was not conducive to economic exchanges, according to the official Xinhua News Agency.

Yellen’s trip comes as China seeks to attract more foreign investment after years of Covid controls and regulatory shocks, as well as worsening geopolitical ties with the West. Despite those tensions, the Treasury chief told CBS that American companies still see “enormous opportunities” in China.

Yellen’s portrayal of Chinese growth as healthy for the global economy rather than a threat was “essential to placing the dangerously deteriorating US–China relationship on a sound foundation,” according to Jake Werner, East Asia research fellow at the Quincy Institute.

As her trip closed on Sunday, Yellen struck a confident note that the relationship could continue to improve, saying: “We will have more frequent and regular communication and there will be benefits that come from that.”

--With assistance from Ana Monteiro, Lucille Liu, Fran Wang, Dominic Lau and Jack Sidders.

(Updates with Yellen comments on US recession risk in 11th paragraph.)

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