Treasury Secretary Janet L. Yellen is heading to Beijing this week to test the Biden administration’s ability to improve relations with China while pursuing an economic strategy to reduce U.S. companies’ reliance on Chinese factories. This trip comes at a crucial time as China’s economic rebound begins to fade, and the U.S. prepares to announce new restrictions on investment in Chinese technology industries.
Yellen’s visit, her first as treasury chief, will span four days and include multiple meetings with China’s new leadership team. Both countries are committed to enhancing high-level talks and preventing further deterioration of ties. Topics on the agenda will include the global economy, developing country debt relief, and potential collaboration on climate change.
However, there may be disagreements over the administration’s plans to reduce risk in the U.S.-China commercial relationship by sourcing critical materials, semiconductors, pharmaceuticals, and electric vehicle batteries from friendlier countries. Chinese Premier Li Qiang recently criticized Western efforts to diminish China’s role in global supply chains, emphasizing the importance of mutual interdependence.
Yellen aims to expand on her previous comments about maintaining healthy economic ties between the world’s two largest economies, especially amidst growing national security concerns. During her visit, she plans to engage directly with U.S. companies in China and gain insights into how President Xi Jinping’s team is addressing economic challenges.
China’s economic weaknesses are becoming apparent, with disappointing consumer spending and declining export orders. The overbuilt property sector, which was once a major driver of growth, is no longer sustainable, and the country’s working-age population continues to shrink. Chinese authorities are under pressure to stimulate the economy, but they are unlikely to take drastic measures. Consequently, the global economy is projected to grow by a mere 2.1% this year, according to the latest World Bank forecast.
Yellen’s visit is part of a diplomatic effort that began with a meeting between Presidents Biden and Xi last November. Various senior officials, including John F. Kerry and Commerce Secretary Gina Raimondo, are also expected to visit Beijing later this year.
However, it is important to note that Yellen’s discussions are not expected to yield significant breakthroughs or concrete agreements. The administration’s objectives are relatively modest compared to past U.S.-China initiatives. The focus now is on reestablishing sustained communication between the two countries, as routine contacts had declined in recent years under the Trump and early Biden administrations.
Yellen’s trip presents an opportunity for her to become acquainted with Xi’s new team, which is known for its loyalty to the Chinese leader. The treasury secretary’s schedule has not been disclosed, but she is likely to meet with senior Chinese officials, including Vice Premier Ding Xuexiang or He Lifeng and People’s Bank of China Governor Yi Gang.
While Yellen can expect a warm welcome in Beijing, there are areas of potential friction. U.S. companies operating in China have raised concerns about arbitrary government actions, while Chinese officials may question the administration’s plan to restrict outbound U.S. investment in Chinese technology development. The intention to reduce U.S. reliance on Chinese suppliers may also lead to disagreements.
Overall, Yellen’s visit represents a crucial step in improving U.S.-China relations and finding common ground on economic issues. Effective communication and cooperation between the two countries are essential for global economic stability and growth.
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