| 07 July 2023
In an effort to improve bilateral ties, US Treasury Secretary Janet Yellen embarked on a diplomatic visit to Beijing, where she openly criticized Chinese restrictions imposed on American companies. Yellen stated that Washington and its allies are prepared to retaliate against what they perceive as "unfair economic practices" from Beijing. However, she also expressed a desire for diversification rather than decoupling from China.
Yellen's visit follows Secretary of State Antony Blinken's recent trip to China as the two nations resume talks amid escalating tensions. While the four-day visit is not expected to yield significant results by the time Yellen departs from Beijing Capital airport on Sunday evening, its significance lies in the fact that it is taking place at all.
Over the past few years, relations between Beijing and Washington have deteriorated rapidly due to several contentious issues, including human rights concerns in Xinjiang and Hong Kong, territorial disputes involving Taiwan and the South China Sea, and China's increasing dominance in various industries, such as graphite, silicon, rare earths, lithium batteries, and solar panels.
Yellen expressed deep concern over China's recent punitive actions, including the crackdown on US consulting firms based in China and the introduction of export controls on critical minerals necessary for computer chip production. These measures were implemented shortly after the US imposed restrictions that prevented Chinese companies from accessing advanced chips, while also urging allied countries to follow suit.
During a separate meeting with Chinese officials, Yellen explained that the US curbs on advanced technology exports are driven by national security considerations and not an attempt to gain economic advantages. Nevertheless, this explanation is unlikely to convince Beijing, as it believes that the US aims to hinder China's progress. China also views the extensive US military alliances and bases across the region, stretching from Australia to Seoul, as containment efforts targeting its rise.
On the other hand, Washington argues that China is impeding fair market access for leading American companies. However, both sides understand that a quick resolution to these issues is unlikely. The era in which the US shepherded China's entry into the World Trade Organization has passed, and the current realities necessitate a more nuanced approach.
China's finance ministry responded by urging the US to take "concrete action" to improve bilateral ties. The ministry stated that the economic and trade relations between China and the US are mutually beneficial, emphasizing that a trade war or decoupling would not benefit either side.
Yellen also emphasized the detrimental effects that severing the deep economic ties between the world's two largest economies would have on the global economy. She described a decoupling scenario as destabilizing and virtually impossible to achieve. In a meeting with representatives of US businesses hosted by the American Chamber of Commerce in China, Yellen underlined the importance of maintaining direct and clear lines of communication between the United States and China.
Communication has been lacking in the US-China relationship for a considerable period, and both sides are now striving to reestablish it. Yellen's visit serves as a crucial step toward managing the relationship and finding common ground in the face of growing tensions. While significant challenges lie ahead, maintaining open lines of dialogue and seeking areas of cooperation will be vital in navigating the complex dynamics between these global economic powerhouses.
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