U.S. Treasury Secretary Janet Yellen traveled to Beijing with no expectations that her meetings with China’s new top economic officials would immediately ease tensions between the two largest economies in the world. Despite the lack of a breakthrough, it remains uncertain whether the 10 hours of meetings, which covered various issues such as U.S. technology export controls and China’s “anti-espionage” law, will have any impact on the trajectory of the relationship.
However, Yellen did achieve her objective of initiating communication with her Chinese counterpart, Vice Premier He Lifeng, and explaining U.S. intentions on a wide range of policies. Scott Kennedy, a China economics expert, emphasized that the accomplishment of the meeting was the meeting itself, rather than the specific issues discussed. He highlighted the lack of communication between the two sides over the past three and a half years, which has led to a deep level of mistrust and cynicism.
Despite the absence of a breakthrough, it is significant that Yellen, He, and other Chinese officials were able to engage in civil and substantive discussions about policy differences. This is particularly noteworthy considering the acrimony that has characterized the relationship in recent years, with disputes over the COVID-19 pandemic, tariffs, national security, trade restrictions, and challenges faced by U.S. firms in China.
While China’s state-run Global Times newspaper described Yellen’s visit as “pragmatic” and “rational,” it expressed skepticism about the positive expectations generated, suggesting that Washington’s policy towards China still focuses on containment and suppression. The newspaper argued that there has been no change in the securitization of economic and trade issues by the U.S.
A senior U.S. Treasury official who accompanied Yellen on her trip described the meetings as “respectful, frank, and constructive,” noting that she was warmly received. Yellen’s meeting with He, China’s new economic czar, was initially scheduled for two hours but lasted five, followed by a cordial dinner.
In addition to He, Yellen also met with Chinese Premier Li Qiang, People’s Bank of China Deputy Governor Pan Gongsheng, senior executives of U.S. companies operating in China, and six female economists to emphasize the importance of gender diversity.
During the meetings, Yellen acknowledged “significant disagreements” between the U.S. and China, citing concerns about China’s unfair economic practices and recent punitive actions against U.S. firms. She specifically mentioned restrictions on critical semiconductor metals. The Chinese side raised issues related to President Joe Biden’s potential executive order to block U.S. investments into China involving sensitive technologies.
Yellen clarified that no decisions had been made regarding the executive order and assured her Chinese counterparts that any investment curbs would be highly targeted and directed at sectors of specific national security concern.
Trade experts acknowledged the difficulty of foreseeing a compromise between Washington and Beijing but emphasized the importance of dialogue. Jake Colvin, president of the National Foreign Trade Council, commended Yellen for striking the right balance between de-risking and diversifying supply chains and recognizing the significance of the economic relationship between the U.S. and China.
Hong Hao, chief economist at Grow Investment Group, suggested that a possible outcome could be an easing of some tariffs on Chinese goods based on an ongoing U.S. review. However, Colvin noted that with the 2024 elections approaching, it would be politically challenging for Biden to unilaterally ease tariffs or other restrictions without reciprocal action from China.
Yellen stated that the talks laid the groundwork for more frequent communications between the U.S. and China at the staff level, focusing on economic issues and areas of disagreement. Her visit is expected to be followed by John Kerry, Biden’s climate envoy, and Gina Raimondo, U.S. Commerce Secretary, who both expressed their desire to visit China.
Wang Yiwei, an international relations professor, believes that the Yellen trip increases the chances of a meeting between Biden and Chinese President Xi Jinping later this year. The Asia-Pacific Economic Cooperation summit in San Francisco in November is a potential venue for such a meeting.
In conclusion, Yellen’s visit to Beijing did not result in an immediate easing of tensions between the U.S. and China. However, it did facilitate communication and discussions on various policy issues. The meetings highlighted the significant disagreements between the two countries but also emphasized the importance of dialogue and the need for more frequent communications. The outcome of the meetings remains uncertain, but they set the stage for further engagement between the two largest economies in the world.
