US Treasury Secretary Janet Yellen called on Friday for greater cooperation on climate change, global debt relief and the prudent use of economic tools for national security at the end of two days of talks in San Francisco with her Chinese counterpart He Lifeng.
The dialogue came before Wednesday’s meeting between Chinese leader Xi Jinping and US President Joe Biden, which is aimed at putting a floor under deteriorating relations between the two adversaries.
“We agreed that in-depth and frank discussions matter, particularly when we disagree,” Yellen said. “And I emphasised that the current uncertain global landscape makes it particularly crucial that we maintain resilient lines of communication going forward.”
Yellen said she raised concerns about the breadth of China’s state-led economic practices and their impact on the global community but added that Washington did not intend to decouple its economy from China’s.
Treasury Secretary Janet Yellen and Chinese Vice-Premier He Lifeng held meetings in San Francisco on Thursday and Friday. Photo: Bloomberg
“This would be damaging to both the US and China and destabilising for the world,” she said. “But a healthy economic relationship requires American workers and firms to be treated fairly.”
Citing areas for potential progress, Yellen said she and He focused on the economic impact of climate change and China’s willingness to join in recapitalising the International Monetary Fund at a time of global economic instability.
Yellen declined to say whether she considered China’s economy “un-investible” and defended Washington’s use of economic tools – including sanctions and export restrictions – to safeguard national security.
In Beijing in August, US Commerce Secretary Gina Raimondo warned that US firms could stop investing in China if it did not address worsening conditions, including raids on foreign firms, unexplained fines and unpredictable official behaviour.
Foreign investment in China turned negative in the third quarter for the first time in decades, although GDP appeared to stabilise.
Yellen also said she warned China not to support Russia’s military in its war against Ukraine. While there is no evidence that the government is involved, she said, Chinese companies and financial institutions have been sanctioned.
She and He spoke at length about China’s economy, which is struggling, though Yellen said she did not have a definitive view on whether Beijing’s countermeasures are sufficient.
China is the second-largest holder of US government debt after Japan, and Chinese investors offloaded US$21.2 billion of US assets in August, the most in four years, according to Treasury Department data.
He reportedly told Yellen that the recent sell-off in US Treasury debt was part of an effort to shore up the yuan, which has weakened.
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Yellen hails ‘step forward’ in US-China ties despite national security concerns
Yellen hails ‘step forward’ in US-China ties despite national security concerns
Traditionally, financial talks between the two sides have been less controversial than those involving defence, China’s large current account surpluses and trade barriers.
But as suspicion has grown and national security issues have increasingly come to define the relationship, macro financial issues have grown more contentious.
The US has argued – as did Yellen on Friday – that its tech export bans are clearly defined, measured, well communicated and aimed at technologies that would strengthen China’s rapidly expanding military.
In August, Biden issued an executive order barring some new US investments in semiconductors, microelectronics, quantum computing, artificial intelligence and other key Chinese tech industries.
This was followed in October by additional measures aimed at tightening some export controls on high-end chips announced last year but easing some others after negotiation with the powerful US semiconductor industry.
Beijing has countered that the US restrictions are punitive, vindictive and designed more to hold back China than to address genuine defence concerns.
But it has also launched its own salvoes, announcing export restrictions on gallium and germanium, minerals critical for the transition to sustainable energy.
“I don’t see the contradiction here,” said Foreign Ministry spokesman Wang Wenbing soon after China’s mineral export limits were announced.
“We oppose the overstretch of the national security concept and abuse of export control by a handful of countries and bullying practices of going all out to suppress and contain specific countries,” Wang said, adding that the export controls were “completely legitimate and justified”.
Yellen underscored the need to continue communicating and moving ahead.
“There are many remaining areas of disagreement between our countries. And we know that there is an important difference between words and actions,” she said.
“But the United States will live up to the understandings that we reached, and we expect our counterparts to do the same.”
