July 10, 2023 at 01:00PM
Treasury Secretary Janet Yellen’s recent two-day visit to Beijing marked a significant step towards containing the escalating economic rivalry between the United States and China. While the military aspect of the relationship remains strained, Yellen’s high-profile engagement offered hope for establishing guardrails in economic competition.
During the extensive 10-hour meetings held on Friday and Saturday, Yellen focused on reassuring China’s newly appointed economic team that the United States is not seeking to gain an unfair economic advantage over the country. Despite the Biden administration’s increased export controls and contemplation of curbing American companies’ outbound investments, Yellen emphasized that these measures are “targeted” and solely intended to safeguard national security.
Yellen acknowledged that resolving the complex challenges between the two nations would not happen overnight but expressed optimism that her visit would help establish a resilient and productive channel of communication with China’s economic team.
The Chinese side raised concerns over economic sanctions, containment, tariffs, export controls, and the ban on products produced in Xinjiang. These topics are expected to test the strength of the guardrails Yellen seeks to establish. Specifically, the forthcoming executive order by President Joe Biden, which will review and impose restrictions on U.S. investments in semiconductors, artificial intelligence, and quantum computing, could potentially impact China by limiting certain investments in these sectors.
Yellen acknowledged the need for monitoring and addressing China’s concerns regarding unintended consequences of U.S. actions. This commitment highlights Washington’s willingness to consider Beijing’s views and feedback in designing and implementing measures against China.
Premier Li Qiang, during his meeting with Yellen, highlighted that an excessive focus on security would not benefit the economic development of both countries or the world at large. This sentiment was reiterated in Yellen’s engagement with Vice Premier He Lifeng.
The Treasury chief repeatedly emphasized the importance of deep and broad bilateral economic relations, underscoring the existence of uncontroversial economic interactions between the two nations that should be recognized by businesses on both sides.
China’s economic recovery has faced obstacles, making Yellen’s visit all the more significant for the country. Her message may alleviate concerns among U.S. allies that Washington aims to fragment the global economy into separate American and Chinese blocs. Notably, the United States has pressured Japan and the Netherlands to join in restricting exports of cutting-edge technological products to China.
Yellen’s visit, coupled with Secretary of State Antony Blinken’s recent trip to Beijing, conveys an image of responsible engagement, which resonates with a global community eager to avoid being forced to choose sides in a new Cold War.
The visit also sets the stage for enhanced U.S. and Chinese efforts to boost their influence in the Global South. Yellen will have an opportunity to address this engagement at the upcoming meeting with finance chiefs from the Group of 20 emerging and developed nations in India.
Yellen’s remarks in Beijing introduced the notion of diversification rather than decoupling in U.S. efforts to promote trade and investment beyond China. She stressed that derisking focuses on clearly articulated national security concerns and broader considerations of supply chain diversification, limited to a few important sectors.
It is worth noting that a true resolution to the economic impasse would likely require the dismantling of the trade tariffs imposed during the Trump administration, representing a significant political risk for President Biden.
While Yellen’s visit may not alter the underlying dynamics of the economic relationship between the United States and China, her engagements in Beijing play a pivotal role in familiarizing the Biden administration with President Xi Jinping’s newly appointed economic team. The talks fostered better understanding and opened channels for continued communication at multiple levels between the two nations.
Yellen’s visit to China underscores the importance of responsible engagement and cooperation amidst the growing rivalry between the world’s two largest economies. By seeking to contain economic risks and enhance communication, both the United States and China can work towards maintaining a productive economic relationship while managing their areas of difference.
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