Rebuilding Bridges: US Treasury Secretary Yellen’s Visit to China

By | July 6, 2023

In a bid to restore relations between the two largest economies in the world, US Treasury Secretary Janet Yellen is set to arrive in China. This visit follows a tumultuous year that saw a decline in the relationship between the United States and China. With a range of contentious issues such as Taiwan, Ukraine, national security, and a trade dispute on the table, the stakes are high for both nations.

Curbing tensions and finding common ground is at the forefront of Yellen’s visit, as she believes that the two economies can work together. The trip holds particular significance as it marks her first meeting with China’s new Vice Premier He Lifeng. Yellen’s recent comments emphasizing collaboration between the two nations are crucial in setting the tone for the discussions.

Prior to the visit, the United States underscored the importance of responsibly managing the relationship, direct communication on areas of concern, and joint efforts in addressing global challenges. In line with these ongoing efforts to ease tensions, Yellen engaged in a frank and productive discussion with China’s ambassador to the US, Xie Feng, signaling a willingness to find common ground.

Wendy Cutler, Vice President at the Asia Society Policy Institute, cautions against high expectations for the Yellen visit, stating that she is not in a position to repair ties or address Chinese requests regarding export controls or tariffs.

This visit closely follows US Secretary of State Antony Blinken’s trip to Beijing, where he met with President Xi Jinping and Foreign Minister Qin Gang. Blinken’s visit, the highest-ranking in nearly five years, was seen as a crucial test to determine if the relationship between the two countries could be salvaged. Although Blinken expressed hope for improved communication and engagement, President Joe Biden’s subsequent reference to President Xi as a “dictator” triggered protests from Beijing, creating further tension.

The ongoing trade dispute remains a significant point of contention between the US and China. China recently announced tighter controls on the export of two critical materials used in computer chip production, gallium and germanium. This move is a response to Washington’s efforts over the past year to limit Chinese access to advanced computer chips. It is worth noting that the US is currently leading China in the chip industry.

According to Priyanka Kishore from the business forum IMA Asia, the US and China face a complex array of issues. While there is a desire to establish a working political relationship, actions like tit-for-tat policies dominate the landscape.

During her meetings in Beijing, Yellen is expected to emphasize the US’s commitment to defending human rights and national security interests. Simultaneously, she will highlight Washington’s willingness to collaborate with Beijing on global issues, including climate change and the challenges faced by heavily-indebted countries. Yellen takes a more conciliatory approach, expressing that Washington does not intend to sever economic ties with China. Her globalist worldview prioritizes avoiding a complete separation of the two economies to prevent destabilization worldwide.

Ken Rogoff, former Chief Economist of the International Monetary Fund, likens the dynamic between Blinken and Yellen to a “good cop, bad cop” scenario. Blinken’s role as the bad cop involved addressing challenging issues, such as Taiwan and Ukraine. In contrast, Yellen aims to find common ground and explore areas of cooperation with China. However, Rogoff warns against interpreting Yellen’s approach as being soft on Beijing, as she is likely to address concerns like intellectual property laws and market access.

Despite the tensions, the interdependence of the US-China trade relationship remains evidentin trading figures. Trade between the two countries has continued to grow, with China exporting over $536 billion worth of goods to the US in 2022, while the US exported $154 billion worth of goods in return.

As efforts continue to resolve their differences, the looming US presidential election adds another layer of uncertainty. Professor Eric Harwit of the University of Hawaii’s Department of Asian Studies predicts that if there is a second Biden administration after 2024, there may be a loosening of trade sanctions and tariffs, particularly those unrelated to high technology sectors.

In conclusion, Treasury Secretary Janet Yellen’s visit to China holds great significance in rebuilding the strained relationship between the two economic powerhouses. While challenges and tensions persist, there is hope for improved communication, engagement, and collaboration on various global issues. The interdependence of their trade relationship further underscores the importance of finding common ground. Only time will tell how these diplomatic efforts will shape the future of US-China relations.

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