Janet Yellen’s trip to China: 3 takeaways

The deep chill between the US and China eased slightly over the past few days as Treasury Secretary Janet L. Yellen held lengthy talks with a new group of senior economic policymakers in Beijing.

Ms. Yellen used softer language for America’s economic strategy toward China, ignoring a term that has caught on in Washington but offended Beijing. However, although more talks are a possible outcome of Ms. Yellen’s trip to China, neither she nor Chinese officials have backed down from their political positions. This has left both sides facing the prospect of further disputes over trade, investment and technology.

Last fall, the Chinese Communist Party congress paved the way for the country’s president, Xi Jinping, to install a new team of loyalists in top economic positions. And the officials — including Ms. Yellen’s counterpart, Deputy Prime Minister He Living — generally have less international experience than their predecessors and are less familiar with policymakers in the West. China has also gradually curtailed the dissemination of economic information, halting many reports, making it more difficult to know what is really going on in the Chinese economy.

One of Ms. Yelin’s main goals was to meet the new China team. She also wanted to understand what was happening in the Chinese economy, which has rebounded more slowly than expected this year after China lifted nearly three years of strict measures to combat the pandemic.

At least on these narrow goals, Ms. Yellen appears to have had some success as she held 10-hour talks with four of China’s top economic policymakers, notably Mr. He. While the Biden administration has held several rounds of high-level diplomatic talks with China, these were the first economic talks of its kind during this administration.

R said Nicholas Burns, the US ambassador to China, said reopening the economic talks, “is very much in our interest, to deliver tough, direct messages on issues where we disagree and to engage where our interests align with the world’s second-largest economy.”

Highly sensitive to the language of diplomacy, Chinese officials have strongly opposed calls in Washington over the past several years for the US economy to withdraw or “decouple” from China. They fear that multinational corporations will shift vast supply chains and tens of millions of jobs from China to other countries.

The President of the European Commission, Ursula von der Leyen, in March put forward a gentler and more neutral term: “risk aversion”. At first, Chinese officials and state media had few objections to not taking the risk, but they began to denounce it after the US National Security Adviser, Jake Sullivan, used it in a speech a month later.

Repeatedly during her trip, Ms. Yellen sought to assuage China’s fears that the United States ever sought secession, even avoiding mention of taking no chances. She said instead that the United States wanted diverse Supply chains – which is a long-term goal of China’s public policy as well.

“There is an important difference between decoupling, on the one hand, and, on the other hand, diversifying critical supply chains or taking targeted national security measures,” she said.

The Biden administration maintains that its recent restrictions on high-tech exports to China, particularly the most advanced semiconductors, focus narrowly on US military security. Management has tried to describe its actions as building a high fence around just a small yard of tech.

But even after Ms. Yelin’s visit, many in China are skeptical. While the US presents the policies as “only for national security, the question now is how big is the national security arena,” said Wu Xinbo, dean of international studies at Fudan University in Shanghai.

Apparently missing from Ms Yelin’s press conference on Sunday, and from a separate statement from China’s official news agency, Xinhua, was any indication that even one of the many trade, investment and technology issues between the two countries had been resolved.

China placed restrictions last Monday on the export of two critical metals, gallium and germanium, which are used in computer chips. China produces nearly all of the world’s supply of both materials. The export controls were widely seen as retaliation for US restrictions on semiconductor exports to China, though Beijing has not described its measure as retaliation. Ms. Yellen, speaking Sunday on CBS’ “Face the Nation,” said the move was “potential” retaliation.

Beijing is also preparing for the long-discussed possibility that a Biden administration could limit US investment in some high-tech sectors of the Chinese economy. China imposed its own restrictions on overseas investment in 2015. Beijing has led the country’s businesses and households away from speculating on US real estate and European soccer clubs and instead buying offshore companies in aircraft production, heavy manufacturing, artificial intelligence, cybersecurity and more. strategic sectors.

On Sunday, however, Ms. Yellen tried to put an optimistic touch on her visit, as she sought to refute speculation that conflict might be inevitable.

“Navigating the parameters of the relationship between the United States and China is not an easy task, but we must never forget that despite the challenges, our path is not predetermined,” she said.

Alan Rapport Contribute to the preparation of reports.