Yellen says US-China ties on ‘surer footing’ after critical trip

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 isn’t trying to hold back its biggest economic rival.

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 that has seen both side restrict exports critical to advanced technologies.

The US Treasury chief emphasised the benefits of trade with China and said she’d stressed to sceptical 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.

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 towards 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 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 (Jul 9). “We believe the world is big enough for both of our countries to thrive.”

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Yellen’s visit was part of a broader push by President Joe Biden’s administration to mend relations with America’s main geopolitical rival, while also sending clear messages about US policy. 

During her visit she met Pan Gongsheng, who is expected to take over as governor of China’s central bank, as well as her former counterpart Liu He – a fluent English-speaking veteran of the international stage who has a rapport with Yellen. 

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

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 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 China’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” towards a few sectors. “I wanted to allay their fears that we would do something that would have broad-based impacts on the Chinese economy,” she added, referring to her counterparts in Beijing.

Vice-premier He warned the US on Saturday that “generalising national security” was not conducive to economic exchanges, according to a readout published by the official Xinhua News Agency.

Treasury officials said stressed that Yellen’s primary objective in Beijing was to build communication channels with the Chinese government’s new economic team. On Sunday, Yellen said the meetings she’d had in Beijing gave her confidence more talks could be achieved.

“We will have more frequent and regular communication and there will be benefits that come from that,” she said.