For several years, the relationship between the United States and China has existed in a state of tension and concern. Improved relations are necessary to combat many of the world’s issues and prevent a devastating conflict from occurring. Fortunately, we are currently witnessing the start of the process toward renewed relations and increased communication between the two countries. As President Biden predicted in late May regarding tensions with Beijing, “you’re going to see that begin to thaw very shortly.” Secretary of Treasury Janet Yellen’s recent arrival in Beijing on a four day official visit to discuss prominent issues of concern underscores this point.
Top-level U.S. officials traveling to China clearly indicate an intention to avoid the escalation of relations. Secretary of State Antony Blinken’s trip to China from June 18-19 initiated this process. Although the two sides could not achieve any significant concrete results, it did succeed in encouraging further talks between the two countries. Secretary Yellen’s trip to China to meet with high-ranking officials is the first major U.S. bureaucrat to travel to Beijing since Blinken’s trip concluded. Although she will not speak with Chinese President Xi Jinping, she will meet with one of Xi’s closest allies—Li Qiang. Additionally, on July 7th, she will also speak with Former Vice Premier Liu He and have dinner with former People’s Bank of China governor Zhou Xiaochuan.
Before Secretary Yellen’s trip to Beijing, the Treasury released a statement that the goal of the journey is “to responsibly manage our relationship, communicate directly about areas of concern, and work together to address global challenges.” Yellen will also reiterate the three principles guiding America’s economic relationship with the PRC that she originally stated during a speech in April. These three principles are securing the United States’ national interests, establishing and maintaining a mutually beneficial and healthy relationship with China, and cooperating with China on major global issues of concern. On July 7th, Yellen acknowledged concern about new export controls recently announced by China on two critical minerals used in technologies like semiconductors when meeting with U.S business leaders. “We are still evaluating the impact of these actions, but they remind us of the importance of building resilient and diversified supply chains” said Yellen. On July 4th, Chinese officials announced it would impose restrictions on gallium and germanium—minerals used in computer chips and other technologies. These restrictions hark back to the infamous incident in 2010 when China restricted rare earth minerals to Japan. In the Chinese publication, the China Daily, former vice-minister of commerce Wei Jianguo stated, “This is just the beginning of China’s countermeasures, and China’s tool box has many more types of measures available. If the high-tech restrictions on China become tougher in the future, China’s countermeasures will also escalate.”
However, although this meeting will seek to push the U.S. and China closer together, many grievances will endure. Hence, with the understanding that the relationship will remain competitive for the near future, each country desired to showcase its strengths and establish a tone before the meetings officially began. On the U.S. side, on top of its other restrictions placed on Beijing in the past few months, it has most recently sought to restrict China’s access to cloud services. This leniency in allowing Beijing to maintain access facilitated its ability to manipulate a loophole in the Biden administration’s restrictions on chip exports to China. In addition to smuggling, these cloud-computing services were the predominant route for Chinese companies to gain access to the most advanced chips.
According to the secretary of treasury official statement, Yellen intends “to talk about the bilateral economic relationship, raise issues of concern, and discuss ways we can work together on global challenges.” Foreign debt and currency exchange will also be critical topics of discussion. Of the total 7.6 trillion held by foreign countries, Japan and Mainland China held the greatest portions with China holding 868.9 billion U.S dollars in U.S. securities.
Currently, the major issue of concern for the U.S. encompasses China using technology provided by U.S. companies for dual-use purposes. Thus, the U.S. and its allies implemented targeted export controls; or, as National Security Advisor Jake Sullivan put it in late April, “we are protecting our foundational technologies with a small yard and high fence.” This logic is a major reason the United States has embarked on an extensive effort to bar China from receiving the most advanced chips. However, Chinese economic coercion, such as its restriction of rare earth minerals to send a message to the U.S. and its allies, is sure to be a topic of discussion during Yellen’s meeting with officials as well.
Before the trip, Yellen was able to gain deeper insight into Chinese grievances and opinions during her meeting with the newly appointed Chinese ambassador to the U.S., Xie Feng. After the discussion, Embassy spokesperson Liu Pengyu tweeted that Xie “raised #China’s main concerns in economic & trade areas, and required the U.S. side to take them seriously and take actions to resolve them.” It is clear that Beijing’s most significant desire is for Washington to decrease restrictions on Beijing’s ability to receive chip imports.
However, although tensions are high, Chinese State-controlled media, the Global Times, recently published an article that presents Yellen’s visit favorably. On July 5, Dr. Wu Xingbo of Fudan University penned a piece stating that reshaping the framework of U.S.-China relations is desirable and feasible. However, one key idea is that the two sides must come to an understanding regarding the international order. This is something that is too complicated to be resolved soon, particularly during the treasury secretary’s visit.
Like Secretary Blinken’s visit to Beijing, this trip is anticipated to produce little tangible outcomes. Its true purpose lies in providing a platform for both sides to openly express their grievances in a constructive face-to-face manner. Treasury Secretary Yellen aims to seek common ground with her Chinese counterparts and influential figures within Chinese society, thereby laying the groundwork for future discussions where attempts can be made to address major issues. In this context, these meetings are instrumental in furthering U.S.-China relations. The next noteworthy U.S. official to journey to Beijing will be John Kerry, who will endeavor to decrease barriers currently in place that prevent the two countries from engaging in meaningful climate change-related discussions.
Special thanks to Nathaniel Schochet who’s exceptional analysis, research and editorial edits were essential to this article.
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