U.S. Treasury Secretary Janet Yellen concluded her visit to Beijing on Sunday, where she engaged in discussions with Chinese officials regarding security-related restrictions on technology exports. Yellen acknowledged China’s complaints about these measures and expressed a willingness to “respond to unintended consequences.”
Yellen emphasized the importance of targeted trade measures that some Chinese leaders argue are designed to harm their country’s emerging tech industries. While the Biden administration aims to avoid unnecessary repercussions, Yellen did not indicate any potential policy changes at this time.
Currently, bilateral relations between the United States and China are at their lowest point in decades, largely due to disagreements regarding technology, security, and other contentious issues. A major concern raised by China revolves around restrictions on accessing processor chips and other U.S. technology on security grounds. These limitations have the potential to hinder the ruling Communist Party’s efforts in developing industries such as smartphones and artificial intelligence.
In an effort to foster communication and address concerns, Yellen announced plans to establish channels for China to express their objections regarding U.S. actions. Additionally, she stated that the U.S. would offer explanations and possibly make adjustments to address any unintended consequences of its actions.
During her visit, Yellen engaged in extensive discussions with China’s No. 2 leader, Premier Li Qiang, as well as other high-ranking officials. She also held a five-hour meeting on Saturday with Vice Premier He Lifeng, her Chinese counterpart. Notably, there were no scheduled meetings between Yellen and Chinese leader Xi Jinping.
Overall, Yellen’s visit to Beijing aimed to revive strained relations between the two largest economies in the world by addressing concerns and seeking common ground on trade and technology-related issues.
Yellen’s Visit to China Sparks Limited Progress on Trade Issues
Chinese officials showed no indication of altering their industrial or trade policies despite the warm welcome and extensive coverage given to U.S. Treasury Secretary Janet Yellen during her visit to the country. Washington and other governments have repeatedly voiced concerns that these policies infringe upon Beijing’s free-trade commitments.
In an effort to improve relations, Yellen emphasized the need for a “rational and pragmatic attitude” from Washington during discussions on Saturday.
While no major disputes were resolved and no concrete plans for future activity were announced, Yellen did express the intention for “more frequent and regular” communication between her department and Chinese officials, signaling a commitment to ongoing dialogue.
The strain in U.S.-Chinese political relations is contributing to an atmosphere of uncertainty that is hindering consumer confidence and business investment.
Although China’s economic growth rebounded to 4.5% in the first quarter of 2023, up from last year’s 3%, following the lifting of anti-virus controls on travel and business activity in December, both factory activity and consumer spending have slowed down since then.
In March, President Xi accused Washington of deliberately impeding China’s industrial development.
Despite the imposition of technology restrictions by the U.S., China has been cautious in its retaliatory actions, potentially to minimize disruptions in its own industries. However, just days prior to Yellen’s visit, the government announced unspecified controls on the export of gallium and germanium, crucial metals used in the production of semiconductors and solar panels. China is the largest global producer of both.
Yellen’s visit to China yielded limited progress in addressing trade issues and promoting cooperation. While officials offered a warm reception, there was no indication of policy changes from Beijing. Ongoing communication between the U.S. Treasury Department and Chinese officials is planned, but the strain in political relations between the two countries continues to cast a shadow of uncertainty. China’s economic growth, although rebounding earlier in the year, has shown signs of deceleration, posing further challenges for both domestic and international markets.
Yellen’s Efforts to Address Trade and Economic Concerns with China
In her recent visit to China, Treasury Secretary Janet Yellen emphasized the Biden administration’s commitment to economic collaboration and the mitigation of trade risks. Yellen made it clear that the United States is not seeking to decouple or separate its economy from China, but rather aims to “de-risk” trade.
One of the administration’s key goals is to reduce reliance on Taiwan and other Asian suppliers in the semiconductor industry, which is considered a security risk. In line with this objective, the United States is encouraging semiconductor makers to relocate their production to U.S. soil. Additionally, efforts are being made to explore alternatives to Chinese supplies of rare earth elements, crucial metals utilized in various products such as smartphones and wind turbines.
Yellen addressed concerns raised by Chinese officials regarding the perceived decoupling efforts. She reassured her counterparts that the de-risking strategy does not equate to decoupling, emphasizing that it focuses on addressing specific national security concerns and diversifying supply chains in select sectors.
During her visit, Yellen emphasized the importance of healthy economic competition. This statement drew attention to longstanding complaints that Beijing violates its free-trade commitments by providing subsidies and protectionism to politically favored industries, shielding them from competition, both domestic and foreign.
Yellen also expressed concern over coercive activities targeting U.S. companies. She raised these concerns in the context of recent raids on consulting firms and detentions of staff members without clear explanations. The U.S. government has denounced these instances as arbitrary measures employed to pressure individuals involved in business disputes.
Overall, Yellen’s visit aimed to foster open dialogue, address shared concerns, and pave the way for a healthier economic relationship between the United States and China. The emphasis on national security de-risking and fair economic competition sets the tone for future engagement in these critical areas.
Chinese Leaders Seek to Restore Investor Confidence
Chinese leaders are making efforts to attract foreign investors, but their calls for economic self-reliance have left many foreign companies feeling uncertain about their status. Another cause of concern is the expansion of an anti-spying law, which has created ambiguity around the scope of work for law firms and consultants.
Bridging the Gap: Yellen’s Appeal for Cooperation
Recently, Yellen reached out to Chinese officials, urging cooperation on global challenges such as climate change and the debt burdens faced by developing countries. She emphasized the importance of maintaining economic and financial relations despite disagreements on trade and security.
Climate Discussions: A Rocky Road
Last August, Beijing suspended climate discussions with Washington as a response to a visit by Nancy Pelosi, the then-Speaker of the House of Representatives, to Taiwan. China considers Taiwan as part of its territory. However, there seems to be a renewed hope as President Joe Biden’s climate envoy, John Kerry, is scheduled to visit China next week. China and the United States are the world’s leading emitters of carbon, making their cooperation crucial in combating climate change.
Successful Cooperation: Debt Restructuring in Zambia
China recently signed an agreement to restructure Zambia’s debt, including the billions of dollars lent under Beijing’s Belt and Road Initiative for infrastructure development in Asia and Africa. This move has been cited by Treasury officials as an example of successful cooperation between China and other nations.
Despite these attempts at revival, the concerns raised by foreign companies regarding their status and the uncertainty surrounding the anti-spying law continue to cast a shadow over investor sentiment in China.