Janet Yellen’s Trip to China: 3 Takeaways


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The deep chill between the United States and China moderated a little over the past few days as Treasury Secretary Janet L. Yellen held marathon talks with a new group of top economic policymakers in Beijing.

Ms. Yellen used softer language for America’s economic strategy toward China, disavowing a term that had caught on in Washington but offended Beijing. Yet even though more talks are a likely outcome of Ms. Yellen’s trip to China, neither she nor Chinese officials retreated from their policy positions. That left the two sides facing the prospect of further conflicts over trade, investment and technology.

Last fall, China’s Communist Party congress cleared the way for the country’s president, Xi Jinping, to install a new team of loyalists in top economic roles. The officials — including Ms. Yellen’s counterpart, Vice Premier He Lifeng — generally have less international experience than their predecessors and are less familiar to policymakers in the West. China has also gradually curtailed the release of economic information, discontinuing many reports, making it harder to know what is really happening in the Chinese economy.

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

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

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

Chinese officials keenly sensitive to the language of diplomacy have vigorously opposed calls in Washington over the past several years for the American economy to pull away, or “decouple,” from China’s. They fear that multinational companies would shift their extensive supply chains and tens of millions of jobs from China to other countries.

The European Commission president, Ursula von der Leyen, put forward in March a gentler and more neutral term: “de-risking.” Chinese officials and state media initially had few objections to de-risking, but started denouncing it after the U.S. national security adviser, Jake Sullivan, used it in a speech a month later.

Ms. Yellen sought repeatedly during her trip to allay China’s concerns that the United States sought to decouple at all, and she even avoided mentioning de-risking. She said instead that the United States wanted diverse supply chains — which happens to be a longtime public policy goal of China as well.

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

The Biden administration maintains that the recent limits it has placed on high-tech exports to China, notably of the most advanced semiconductors, are narrowly focused on American military security. The administration has tried to characterize its actions as building a high fence around only a small yard of technologies.

But even after Ms. Yellen’s visit, many in China are skeptical. As the United States presents policies as “just for national security, then the question is how big is the yard of national security,” said Wu Xinbo, dean of international studies at Fudan University in Shanghai.

Conspicuously missing from a news conference Ms. Yellen held on Sunday, and from a separate statement by China’s official news agency, Xinhua, was any suggestion 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, used in computer chips. China produces almost all of the world’s supply of both materials. The export controls were widely seen as retaliation for American limits on semiconductor exports to China, although Beijing did not characterize its measure as retaliation. Ms. Yellen, speaking Sunday on CBS’s “Face the Nation,” said the move was “potentially” retaliatory.

Beijing is also bracing for the long-discussed possibility that the Biden administration may limit American investment in certain high-tech sectors of the Chinese economy. China imposed its own curbs on outbound investments in 2015. Beijing steered the country’s companies and households away from speculating on American real estate and European soccer clubs and pushed them instead to buy overseas businesses in aircraft production, heavy manufacturing, artificial intelligence, cybersecurity and other strategic sectors.

Ms. Yellen nonetheless tried on Sunday to put an optimistic spin on her visit, as she sought to rebut speculation that conflict may be inevitable.

“Navigating the contours of the relationship between the United States and China is no easy task, but we must never forget that, despite the challenges, our path is not predestined,” she said.

Alan Rappeport contributed reporting.


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