U.S Treasury Secretary Janet Yellen wrapped up a four-day visit to China today, saying strained ties between the world’s two largest economies are on “surer footing” though “significant” differences remain.
About 10 hours of talks in Beijing “served as a step forward in our effort to put the U.S.-China relationship on surer footing,” Yellen said in a prepared text for delivery at a press conference on Sunday.
“My objective during this trip has been to establish and deepen relationships with the new economic leadership team in place in Beijing. Our discussions are part of a broader concerted effort to stabilize the relationship, reduce the risk of misunderstanding, and discuss areas of cooperation,” said Yellen, who met with Chinese Premier Li Qiang, Vice Premier He Lifeng, Finance Minister Liu Kun and People’s Bank of China leader Pan Gongsheng.
“These conversations were direct, substantive, and productive. We were able to learn more about each other’s economies and policy choices, which I believe is vital as the world’s two largest economies,” Yellen said. “Even where we don’t see eye-to-eye, I believe there is clear value in the frank and in-depth discussions we had on the opportunities and challenges in our relationship, and the better understanding it gave us of each country’s actions and intentions.”
“No one visit will solve our challenges overnight,” Yellen said. “But I expect that this trip will help build a resilient and productive channel of communication with China’s new economic team. “
A wide swath of differences ranging from trade practices to geopolitics remain. “The U.S. and China have significant disagreements. Those disagreements need to be communicated clearly and directly,” she said.
Relations between the two nosedived after a visit last August by then House of Representatives Speaker Nancy Pelosi to democratic, self-ruled Taiwan, over which Beijing claims sovereignty. After apparent improvement following a meeting between U.S. President Joe Biden and Chinese President Xi Jinping in November, ties plunged again after a suspected Chinese spy balloon flew over the American heartland in February, setting off an uproar in Congress. Security concerns have more recently fused with trade following U.S. restrictions on the exports of sensitive chip-making equipment to China, a move that has since led to tit-for-tat regulatory steps by Beijing that could limit its exports of minerals used by the semiconductor industry.
Yellen arrived in Beijing days after China on July 1 implemented revisions to a security law that have unnerved U.S. businesses. China has this year raided American research or due diligence companies in the mainland such as Bain and Mintz on security grounds. On June 30, the U.S. Embassy issued a statement urging Americans to “reconsider travel due to the arbitrary enforcement of local laws, including in relation to exit bans, and the risk of wrongful detentions.”
“U.S. citizens traveling or residing in the PRC (People’s Republic of China) may be detained without access to U.S. consular services or information about their alleged crime. U.S. citizens in the PRC may be subjected to interrogations and detention without fair and transparent treatment under the law,” the statement said.
Growing tension between the two global giants has led many businesses to diversify supply chains away from China. The days of multinational companies having 100% of overseas sourcing from China “are over,” Stephen Roach, a long-time Asia expert at Morgan Stanley and currently a senior fellow at Yale University’s Paul Tsai Center China Center, told Forbes in an interview last month. His latest book, Accidental Conflict: America, China, and the Clash of False Narratives, examines U.S.-China tensions.
Yellen in her statement on Sunday drew a distinction between “decoupling” the two economies and what is known as “de-risking.”
“There is an important distinction between decoupling, on the one hand, and on the other hand, diversifying critical supply chains or taking targeted national security actions,” Yellen said, without using the term “de-risking.”
“We know that a decoupling of the world’s two largest economies would be disastrous for both countries and destabilizing for the world. And it would be virtually impossible to undertake. We want a dynamic and healthy global economy that is open, free, and fair – not one that is fragmented or forces countries to take sides,” she said.
Nevertheless, Yellen called out trade practices seen by American businesses as unfair. “Healthy economic competition is only sustainable if it benefits both sides,” she told Chinese counterparts. “I pressed them on our serious concerns about China’s unfair economic practices. That includes the breadth and depth of China’s non-market policies, along with barriers to market access for foreign firms and issues involving intellectual property.”
“Fair treatment is critical so American firms and workers compete on a level playing field – and benefit economically from trade and investment with China and the huge market it presents for American goods and services. I also expressed my worries about a recent uptick in coercive actions against American firms,” Yellen said.
Yellen at the same time noted that she had met during her trip with “U.S. business leaders who said they would like to see greater economic engagement with China,” adding: “It is important that we work together to make sure businesses understand there is a wide swath of economic interactions that are uncontroversial to both sides.”
Also on a more positive note, Yellen said the two sides “discussed areas where we can work together on global challenges – from tackling the climate crisis to addressing sovereign debt sustainability. This is not a bilateral issue between China and the United States. It is about responsible global leadership. The world deserves and expects its two largest economies to work together on these global problems and help find solutions,” she said.
Yellen noted that she was able to meet with a group of climate finance leaders in Beijing at a roundtable event. The U.S. Treasury and the People’s Bank of China co-chair the G20 Sustainable Finance Working Group, “a concrete example of our ability to work together and lead on global challenges,” she said.
“President Biden and I do not see the relationship between the U.S. and China through the frame of great power conflict. We believe that the world is big enough for both of our countries to thrive. Both nations have an obligation to responsibly manage this relationship: to find a way to live together and share in global prosperity,” Yellen said.
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