US controls on investment will not harm China, Yellen tells Beijing

Receive free US-China relations updates

We’ll send you a myFT Daily Digest email rounding up the latest US-China relations news every morning.

US controls on investment into China would only target sensitive national security sectors, Janet Yellen has told her counterparts in Beijing during a four-day visit aimed at putting a “floor” under their turbulent relationship.

Speaking at a news conference on the final day of her visit, which included meetings with Premier Li Qiang and her counterpart He Lifeng, the US Treasury secretary said she wanted to allay concerns about harm to China’s economy from the possible national security action.

Throughout her visit Yellen has talked up the potential for ongoing trade and economic co-operation between the US and China, highlighting Washington’s desire to stabilise the relationship, even as it makes it harder for China to obtain American technology.

The Biden administration is now considering a mechanism to reduce the risk of US investment helping China’s military. “I emphasised that [investment screening] would be highly targeted and clearly directed narrowly at a few sectors where we have specific national security concerns,” Yellen said.

Over the course of her visit, Yellen reiterated that it was important to have high-level engagement between Washington and Beijing despite security-related concerns.

“Even where we don’t see eye-to-eye, I believe there is clear value in the frank and in-depth discussions,” Yellen said.

Yellen said she had voiced concern with her counterparts over everything from security and human rights to an “uptick in coercive actions against American firms”.

“I also raised the importance of ending Russia’s brutal and illegal war against Ukraine,” she added in remarks shortly before departing Beijing. “I communicated that it is essential that Chinese firms avoid providing Russia with material support or assistance with sanctions evasion.”

Her visit came as China grapples with an underwhelming economic recovery after the lifting of Covid controls. While China is targeting growth of five per cent this year, economists fear some underlying growth engines, such as the property sector, are entering a prolonged slump.

This has led the government to seek more foreign investment. But tensions with the US have hurt sentiment, with business concerned about getting caught up in tit-for-tat trade sanctions and increasingly tough national security measures.

China’s state media generally gave muted coverage of the Yellen visit. The Xinhua news agency described the talks as “constructive” and “pragmatic” but said Beijing believes that “generalising” national security issues was “not conducive to normal economic and trade exchanges”.

The nationalist Global Times was more effusive, quoting China’s second-ranked official, Premier Li Qiang, as telling Yellen that “China-US ties can see ‘rainbows’ after a round of ‘wind and rain’”.

Dennis Wilder, a former top CIA China expert now at Georgetown University, said Chinese leaders “clearly see Secretary Yellen as one of the more pragmatic, and less political, senior officials in the Biden administration”.

“They also assess that historically economic and trade relations have been the ballast in US-China relations, stabilising ties even when issues such as Taiwan or the Tiananmen crackdown roiled the relationship,” Wilder added. “After all, overall US-China bilateral trade continues to reach new heights even as the overall relationship has hit new lows.”