Yellen says 'impossible' to decouple China, US economies

Beijing (AFP) – US Treasury Secretary Janet Yellen said Friday that a decoupling of the US and Chinese economies would be "virtually impossible" and would destabilise global markets, in comments made while on a visit to Beijing packed with talks with officials and businesses.

Issued on: 07/07/2023 - 05:12Modified: 07/07/2023 - 08:37

3 min

Yellen's four-day trip is her first to China as Treasury chief © Mark Schiefelbein / POOL/AFP

POLITICS

U.S. Treasury Secretary Janet Yellen meets Chinese Premier Li Qiang

PUBLISHED FRI, JUL 7 20234:49 AM EDT

KEY POINTS

“The United States will, in certain circumstances, need to pursue targeted actions to protect its national security,” U.S. Treasury Secretary Yellen said Friday.
That’s according to remarks prepared for her meeting in Beijing with Chinese Premier Li Qiang.
“We should not allow any disagreement to lead to misunderstandings that unnecessarily worsen our bilateral economic and financial relationship,” Yellen said in her prepared remarks.

US Treasury Secretary Janet Yellen arrives at Beijing Capital International Airport in Beijing on July 6, 2023. Yellen arrived in Beijing on July 6 kicking off a visit aimed at improving communication and stabilising the tense relationship between the world's two largest economies. (Photo by Mark Schiefelbein / POOL / AFP) (Photo by MARK SCHIEFELBEIN/POOL/AFP via Getty Images)

U.S. Treasury Secretary Janet Yellen arrived in Beijing on July 6, 2023, for her first visit under the Biden administration.

Mark Schiefelbein | Afp | Getty Images

BEIJING — U.S. Treasury Secretary Janet Yellen defended American actions to protect its national security in prepared remarks for a meeting with Chinese Premier Li Qiang.

“The United States will, in certain circumstances, need to pursue targeted actions to protect its national security,” Yellen said Friday in prepared remarks.

“And we may disagree in these instances,” she said.

Among several measures, the U.S. in October announced sweeping export controls that restrict the ability of Chinese businesses to develop advanced semiconductors.

This week, China’s Ministry of Commerce said that starting Aug. 1, businesses in China wanting to export two metals used in the manufacturing of chips would need to apply for licenses. The ministry said Thursday the measures were not targeted at a specific country, and that it had notified the U.S. and Europe ahead of the public announcement.

“We should not allow any disagreement to lead to misunderstandings that unnecessarily worsen our bilateral economic and financial relationship,” Yellen said in her prepared remarks.

She said there are “important global challenges” where the U.S. and China need to “cooperate and show leadership.”

Yellen was set to meet with China’s premier on Friday, the second day of her four-day trip to China.
Earlier in the day, she met with former Vice Premier Liu He and former People’s Bank of China Governor Yi Gang. A Treasury official said the meeting lasted for one hour and 15 minutes, longer than scheduled.

“They discussed the global economic outlook as well as the respective economic outlooks for the United States and China,” the official said.

Her trip follows U.S. Secretary of State Antony Blinken’s high-stakes Beijing visit last month, and comes as China’s economic growth has slowed.

Li on Thursday met with economic experts to discuss growth trends and suggestions for economic work, state media said. Li said the complex global political and economic situation has greatly affected China’s development, according to the report.

SECRETARY STATEMENTS & REMARKS

Remarks by Secretary of the Treasury Janet L. Yellen at Roundtable Discussion with U.S. Businesses Operating in the People’s Republic of China (PRC)

July 7, 2023

As Prepared for Delivery

Thank you for joining me today. It is great to see all of you.

I am here in Beijing to carry forward President Biden’s directive from his meeting with President Xi last November to deepen our communications with China, including on economic issues.

We believe that it is in the best interests of both countries to make sure we have direct and clear lines of communication at senior levels. In the economic realm, regular exchanges with our Chinese counterparts can help us monitor economic and financial risks, and it can help create the conditions for a healthy economic relationship between our two countries

I believe that’s particularly important right now as the global economy faces headwinds like Russia’s illegal war in Ukraine and the lingering effects of the pandemic.

During this trip, I am discussing with Chinese officials our respective economic outlooks.

As I said in my speech in April, the U.S. seeks healthy economic competition with China. But healthy economic competition – where both sides benefit – is only sustainable if that competition is fair.

During meetings with my counterparts, I am communicating the concerns that I’ve heard from the U.S. business community – including China’s use of non-market tools like expanded subsidies for its state-owned enterprises and domestic firms, as well as barriers to market access for foreign firms. I’ve been particularly troubled by punitive actions that have been taken against U.S. firms in recent months.

I am also concerned about new export controls recently announced by China on two critical minerals used in technologies like semiconductors. We are still evaluating the impact of these actions, but they remind us of the importance of building resilient and diversified supply chains.

Our economic relationship with China must work for American workers and businesses. I will always champion your interests and work to make sure there is a level playing field. This includes coordinating with our allies to respond to China’s unfair economic practices.

I also think that a shift toward market reforms would be in China’s interests. A market-based approach helped spur rapid growth in China and helped lift hundreds of millions of people out of poverty. This is a remarkable economic success story.

Many of your firms understand how a level playing field can benefit both of our countries. China has an enormous and growing middle-class, with consumers who are eager to consume American goods and services.

I have made clear that the United States does not seek a wholesale separation of our economies. We seek to diversify, not to decouple. A decoupling of the world’s two largest economies would be destabilizing for the global economy, and it would be virtually impossible to undertake.

I also made clear that actions we take to protect our national security are designed to be narrowly targeted – and that they are premised on straightforward national security considerations and not undertaken to gain economic advantage over China.

In fact, trade between our two countries reached an all-time high last year. And if it is fair, trade and investment can support American jobs at home and promote American innovation. A stable and constructive relationship between the U.S. and China is in the interests of American workers and businesses.

I look forward to hearing from you today about your plans in China, as well as how China’s policies and practices are impacting your business operations."

Reuters

8 hours ago

Yellen criticizes China's 'punitive' actions against US companies, urges market reforms | Reuters

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Creator: THOMAS PETER | Credit: REUTERS

Yellen Says US Doesn’t Want ‘Winner Take All’ Fight With China

US Treasury chief made comments to Chinese Premier Li Qiang
Visit comes as China imposes controls on exports of key metals

Viktoria Dendrinou

July 6, 2023 at 11:19 PM PDTUpdated onJuly 7, 2023 at 6:37 AM PDT

US Treasury Secretary Janet Yellen said competition between the world’s biggest economies is not a “winner-take-all” situation, and called for both sides to manage their rivalry with a fair set of rules.

Yellen’s comments were delivered Friday during a meeting with Chinese Premier Li Qiang as she made a long-anticipated trip to Beijing, aimed at finding some common ground between the two superpowers sparring on everything from trade to Taiwan’s security.

“We seek healthy economic competition that is not winner-take-all but that, with a fair set of rules, can benefit both countries over time,” the Treasury chief told China’s No. 2 official, adding that US actions to protect national security should be “targeted.”

Li also struck a note of optimism, telling Yellen he believed bilateral ties would eventually see a “rainbow,” after going through a period of “wind and rain.” He also urged Chinese entrepreneurs to brace themselves for “hardships” and “look further to the horizon.”

Yellen’s high-stakes visit comes as the US and China are locked in a tit-for-tat trade war that ramped up last year with US export controls on semiconductors and chipmaking equipment.
The Biden administration is preparing an executive order curbing US outbound investment in China, which could come as soon as July and cover certain investments in sensitive technologies including semiconductors, artificial intelligence and quantum computing.

President Xi Jinping’s government imposed controls on two critical minerals used in advanced technologies days before Yellen’s arrival.
Earlier in the day, she told a roundtable of US business people operating in China she was “concerned” by those controls.

The US Defense Department announced Friday it was invoking the Defense Production Act to boost domestic mining and processing of gallium and germanium, Reuters reported, citing a Pentagon spokesperson.

Reuters

8 hours ago

Yellen criticizes China's 'punitive' actions against US companies, urges market reforms | Reuters

Visit

Creator: THOMAS PETER | Credit: REUTERS

READ MORE ON US-CHINA TENSIONS:
Why US-China ‘Decoupling’ Prospect Is Getting Serious: QuickTake China Restricts Export of Chipmaking Metals in Clash With US US Climate Envoy Kerry to Visit China in Bid For Progress US-China Ties Need More Than a Quick Handshake

Yellen’s trip is aimed at building longer-term communication channels with the Chinese government’s new economic team rather achieving any substantive breakthroughs.

Despite that, her talks began with two old guards of China’s economy policy: retired Vice Premier Liu He and the People’s Bank of China Governor Yi Gang.

The Treasury’s readout of Yellen and Li’s meeting described it as “candid and constructive.”
Besides discussing competition issues, Yellen emphasized the importance of Washington and Beijing “closely communicating on global macroeconomic and financial issues and working together on global challenges, including debt distress in low-income and emerging economies and climate finance,” it said.

The meeting lasted just more than an hour, according to a Treasury official.

Restarting such dialog is key given recent clouds over China’s economy.

Chinese authorities have cut interest rates and adopted measures to shore up the property market, which has suffered from an overhang of leverage and construction. Policymakers are also increasingly concerned about demographic issues including a declining population and a high youth unemployment rate.

Yellen will use her time in Beijing to discuss with her counterparts the importance of responsibly managing the US-China relationship, communicating directly about areas of concern, and working together to address global challenges, the Treasury said earlier.
She is expected to sit down with more Chinese officials on Saturday, before departing on Sunday after giving a press conference.

The trip marks the first major test of a policy Yellen outlined in April that’s geared toward defending and securing US national security without trying to hold China back economically.

Responsible Relationship
During her roundtable with executives from companies including Boeing Co., Bank of America Corp. and Cargill Inc., Yellen spoke of the opportunity China’s enormous middle class held for American businesses. But she also warned she was “troubled” by “punitive actions” China had taken against US firms in recent months.

The Chinese government in May banned US chipmaker Micron Technology Inc.’s products from some of its critical sectors, while authorities raided US consultancy Bain & Company and New York-based due diligence firm Mintz Group earlier this year.
That turbulence, along with years of Covid controls that disrupted supply chains and a series of regulatory shocks that hit the private sector, has rocked investor confidence in China.
Xi said on Friday it was necessary for China to implement new measures to attract foreign investment, the official Xinhua News Agency reported.

Yellen said that US business leaders in Beijing had expressed concerns over China’s “non-market tools,” such as subsidies for state-owned enterprises and domestic firms.

Despite all that, she reiterated her message that the US does not seek a wholesale separation of the two economies, stressing that it seeks to “diversify” rather than decouple from China.

“A decoupling of the world’s two largest economies would be destabilizing for the global economy, and it would be virtually impossible to undertake,” she said.

“We seek to diversify, not to decouple.”

Yellen will meet and have dinner with Chinese Vice Premier He Lifeng on Saturday evening, according to a senior Treasury official.

She will start they day with a meeting with professionals who work in sustainable finance, an area the US has staked out as key for cooperation.
She will also have lunch with a number of female economists, the official said.

— With assistance by Xiao Zibang

(Updates with Treasury readout of meeting in 10th paragraph.)