Yellen, an economist and former Federal Reserve chair, repeated her call for China to “shift to a market-oriented system” — advice that is unlikely to move Chinese leader Xi Jinping, who has lavished resources on state-owned firms.
The treasury secretary used some of her strongest language to date to reject claims that the United States’ plans to reduce its dependence on Chinese suppliers reflected a broader campaign to split the world into rival blocs. The Biden administration’s restrictions on the sale of advanced computer chips to China — and pending curbs on U.S. investment in Chinese technology development — were “clearly articulated and narrowly targeted” measures designed to protect national security, and not to gain an economic advantage, she said.
“We know that a decoupling of the world’s two largest economies would be disastrous for both countries and destabilizing for the world. And it would be virtually impossible to undertake,” Yellen said in a roughly 30-minute news conference before starting her journey home. “We want a dynamic and healthy global economy that is open, free and fair — not one that is fragmented or forces countries to take sides.”
Yellen billed her visit as proof that the Biden administration’s effort to develop a working relationship with China, after years of growing acrimony and drift, were paying off. But the treasury chief said no new diplomatic negotiations or dialogues were agreed upon.
“President Biden and I do not see the relationship between the U.S. and China through the frame of great power conflict. We believe that the world is big enough for both of our countries to thrive,” Yellen said. “Our discussions are part of a broader concerted effort to stabilize the relationship, reduce the risk of misunderstanding and discuss areas of cooperation.”
Yellen’s talks with members of Xi’s new economic team — spanning about 10 hours over two days — were “direct, substantive and productive,” she said.
After arriving in the Chinese capital on Thursday, Yellen plunged into talks with Chinese Premier Li Qiang and other top officials, including Vice Premier He Lifeng, who is responsible for the economy and foreign trade.
She also spent time with a group of female Chinese economists, climate activists and representatives of the American business community.
Her visit came as both governments try to stabilize a major commercial relationship that has been plagued by a pervasive lack of trust. Yellen sought to reassure Beijing that even as the United States moves to reduce its reliance on Chinese suppliers for vital goods, such as critical materials, electric-vehicle batteries and semiconductors, it does not want an economic rupture.
China is openly skeptical of Yellen’s argument for “de-risking,” which it sees as a polite term for a comprehensive economic decoupling it fears would compound its domestic economic woes.
After growing rapidly in the first few months of the year following the relaxation of coronavirus controls, the Chinese economy has faltered in recent weeks. Consumers are not spending as freely as they were expected to in the post-pandemic period, and export orders have disappointed.
While Yellen began to develop a relationship with He during roughly six hours of talks, additional disputes loom. The Biden administration is expected as soon as this month to unveil new restrictions on U.S. investment in advanced Chinese technology sectors that Washington says could harm national security.
Chinese officials have complained that such restrictions — which would affect technologies such as artificial intelligence and quantum computing — would slow their economic advance.
“I want to allay their fears that we would do something that would have broad-based impacts on the Chinese economy. That’s not the case. That’s not the intention,” Yellen said.
Yellen said her visit succeeded in reviving direct economic dialogue between the two economies. Additional Biden Cabinet officers — including the special presidential envoy for climate, John F. Kerry — are also expected to visit Beijing soon.
Still, official interactions fall short of levels reached in earlier years. During the George W. Bush administration, the two nations engaged in a Strategic Economic Dialogue that involved dozens of senior officials meeting twice a year.
The Obama administration later rebranded that effort, but routine high-level talks continued apace.
On Sunday, Yellen said only that her staff and those of her Chinese counterparts are expected to be in more regular contact.
“No one visit will solve our challenges overnight. But I expect that this trip will help build a resilient and productive channel of communication with China’s new economic team,” Yellen said. “My hope is that we can move to a phase in our relationship where senior-level diplomacy is simply taken as a natural element of managing one of the world’s most consequential bilateral relationships.”
