At her confirmation hearing in early 2021, Treasury Secretary Janet L. Yellen took a hard line on China, describing it as America’s main strategic competitor and vowing to confront its “abusive, unfair and illegal practices” that companies say and workers harmed. in the United States.
Since then, Ms. Yellen has emerged as a moderate voice in the Biden administration, espousing the mantle of economic pragmatism as the global economy deals with inflation and sluggish growth. The Treasury Secretary has expressed objections to China’s human rights record, called for diversification of US supply chains and acknowledged that protecting national security is paramount.
But she has also been the most prominent proponent of maintaining economic ties with China, arguing against tariffs, urging caution about new restrictions on investment in China and, most recently, warning that decoupling the two economies would be “disastrous”. are.
Ms Yellen will arrive in Beijing on Thursday for a four-day visit and will navigate those conflicting interests in real time. The trip, her first as Treasury Secretary, represents Ms. Yellen’s most challenging test of economic diplomacy yet as she seeks to dispel years of festering mistrust between the United States and China.
For Ms. Yellen, the challenge will be to convince her Chinese counterparts that the massive US measures blocking access to sensitive technology such as semiconductors in the name of national security are not intended to harm the Chinese economy. That will not be easy as both countries continue to erect new trade and investment barriers.
The Biden administration is preparing several new restrictions on US technology trade with China, including possible limits on advanced chips and US investment in the country. The upcoming rules appear likely to restrict Chinese companies’ access to US cloud computing services as well, according to people familiar with the matter, in an attempt to close a loophole in previous restrictions on China’s access to advanced chips used for artificial intelligence.
This week, Beijing retaliated against the Biden government’s limits on semiconductors, announcing it would restrict exports of certain critical minerals used in the production of some chips.
On Monday, ahead of her trip, Ms Yellen met in Washington with Xie Feng, China’s ambassador to the United States, and explained her “concerning issues” in what the Treasury Department described as a candid conversation. According to a summary of the conversation released by the Chinese embassy, Mr. Xie explained China’s objections to US trade practices and urged the United States to take steps to resolve them.
At her meetings in Beijing, Ms. Yellen is expected to defend that the Biden administration’s actions to make the US economy less dependent on China and to boost more production of critical materials within the United States are narrowly targeted measures. which are not intended to incite wider economic war. China still has nearly $1 trillion in US debt and is America’s third-largest trading partner, making an abrupt sever of ties potentially disastrous for both countries and the global economy.
“I think she’s going as the sober voice of reason to say it’s not about containment,” said Tim Adams, the president of the Institute of International Finance and a former Treasury secretary for international affairs. “It’s really about setting the tone of cooperation and showing that the US remains interested in partnering with China on trade and investment.”
Over the past few decades, the Treasury has consistently been the US government agency that has tried hardest to maintain friendly relations with China. Wall Street firms, a major constituency for the department, tried to gain access to the Chinese market in the 1990s through China’s negotiations to join the World Trade Organization. After China joined the WTO in 2002, Wall Street firms and the Treasury Department pushed for China to act more quickly to actually open up its markets.
Beijing finally agreed in November 2017 to allow foreign investors to hold much larger stakes in insurance, banking and securities companies, as part of a series of concessions made in a failed attempt to end a trade war with prevent the Trump administration.
Although it is her first trip to Beijing as finance minister, Ms Yellen is no stranger to China. In her role as President of the Federal Reserve Bank of San Francisco, she interacted regularly with Chinese officials, and as Federal Reserve Chair from 2014 to 2018, she would meet with officials of the People’s Central Bank at international meetings.
Ms. Yellen’s credentials as an academic economist have made her a welcome emissary in Beijing.
“They like her very much because she sees the world in economic terms, and they’re extremely comfortable with that,” said Craig Allen, the president of the US-China Business Council.
Michael Pillsbury, a senior fellow for China strategy at the Heritage Foundation, said Chinese officials saw Ms Yellen as a voice of reason and hoped she would be able to argue to others in the Biden administration that the United States States should move away from new investment restrictions and rollback rates.
“They want Janet to help,” said Pillsbury, who served as top advisor for China in the Trump administration. “They see her as a friend of China.”
Ms. Yellen does not lead trade policy, but she is critical of the tariffs President Donald J. Trump imposed on more than $300 billion of Chinese imports.
“Tariffs are consumer taxes,” Ms. Yellen told The New York Times in 2021. “In some cases, it seems to me that what we hurt American consumers, and the kind of deal that the previous administration negotiated, was not addressed in many ways the fundamental issues we have with China.”
Those tariffs are still under review by the Office of the United States Trade Representative, and Ms Yellen has acknowledged that they are unlikely to be reversed any time soon.
Ms Yellen’s ability to forge deeper ties with Beijing may be complicated by the current political moment.
Concerns about China have increased after a spy balloon crossed the United States before being shot down over the Atlantic Ocean. The upcoming presidential election is also likely to escalate anti-China rhetoric as candidates seek to portray themselves as tough on China, which is often a winning campaign message. And Republicans have criticized increased reach from the US to China.
Ms Yellen’s visit follows a trip last month by Secretary of State Antony J. Blinken. John F. Kerry, the special climate envoy, is expected to make a trip to Beijing soon.
Rep. Mike Gallagher, a Wisconsin Republican who heads the Chinese Communist Party’s House Select Committee, accused the Biden administration of slow-moving export restrictions targeting Huawei, the Chinese telecom giant, and sanctions against Chinese officials responsible for human rights abuses against Uyghurs in Xinjiang. He argued that China’s behavior had worsened as the Biden administration pursued a “zombie engagement” with the Chinese Communist Party.
“After Secretary Blinken left Beijing with little to show for his trip, doubling down by sending additional cabinet-level officials like Secretary Yellen would only perpetuate this vicious circle,” Gallagher said.
With Republican presidential candidates like Nikki Haley warning that China is “preparing for war” with the United States, there is added urgency for Ms. Yellen to find ways to keep the lines of communication open with her Chinese counterparts, even if her journey doesn’t bear fruit . any major breakthroughs.
“The Chinese are very aware of the US election cycle, and I think that’s part of why they’ve been willing to be a little more open,” said Eswar Prasad, a former head of the China division of the International Monetary Fund. Fund. “Both Secretary Yellen and the Chinese would like to get back to a place where they view at least parts of the economic relationship as a positive-sum game, rather than a zero-sum game.”
Keith Bradsher reporting contributed.
