Treasury Secretary Janet Yellen Visits Beijing to Navigate U.S.-China Relations and Economic Strategy

Treasury Secretary Janet L. Yellen is set to travel to Beijing this week in an effort to improve relations with China while pursuing an economic strategy aimed at reducing U.S. companies’ reliance on Chinese factories. This trip comes as China’s economic rebound from its strict zero-covid policy shows signs of flagging and as the Biden administration prepares to announce new restrictions on U.S. investment in Chinese technology industries.

During her four-day visit, Yellen is expected to have multiple meetings with members of China’s new leadership team, focusing on issues such as the global economy, developing country debt relief, and potential cooperation on climate change. However, the two sides may clash over the administration’s plans to “de-risk” the U.S. commercial relationship with China by relying on friendlier countries to produce critical materials, semiconductors, pharmaceuticals, and electric vehicle batteries.

Yellen intends to elaborate on her previous comments about preserving healthy economic ties between the two largest economies in the world, even as national security considerations dominate relations. She plans to meet with U.S. companies operating in China and engage directly with the Chinese people during her visit.

The trip comes at a time when China’s economic growth is showing signs of weakness. Consumers have disappointed, with spending over the recent Dragon Boat holiday lower than in 2019. Additionally, China’s export orders have contracted for the third straight month, and its currency, the yuan, is approaching its lowest value against the U.S. dollar since the 2008 financial crisis.

Yellen’s visit is part of a sequenced diplomatic offensive aimed at building sustained lines of communication with Chinese officials. While the administration’s ambitions are modest compared to previous U.S.-China initiatives, the significance lies in the fact that they are talking and working to establish relationships.

However, there are points of friction between the two countries. U.S. companies operating in China have complained about arbitrary government actions, and the Chinese counterespionage law that took effect on July 1 may complicate normal business information-gathering. Chinese officials are also likely to have questions about the administration’s plan to issue regulations limiting outbound U.S. investment in Chinese technology development.

Overall, Yellen’s visit is not expected to produce any breakthrough in the U.S.-China relationship or result in concrete agreements. The focus is on building communication and relationships between the two countries, which have been lacking in recent years.Treasury Secretary Janet L. Yellen is set to travel to Beijing this week in a crucial test for the Biden administration’s efforts to improve relations with China while reducing U.S. companies’ reliance on Chinese factories. Yellen’s visit comes at a time when China’s economic rebound from its strict zero-COVID policy is showing signs of weakening, and as the administration prepares to announce new restrictions on U.S. investment in Chinese technology industries.

During her four-day visit, Yellen is expected to hold multiple meetings with members of China’s new leadership team, as part of a joint effort to enhance high-level talks and prevent further deterioration of ties. The discussions will cover various issues, including the global economy, developing country debt relief, and potential cooperation on climate change.

However, tensions may arise over the administration’s plans to reduce the U.S. commercial relationship with China by relying on friendlier countries for critical materials, semiconductors, pharmaceuticals, and electric vehicle batteries. Chinese Premier Li Qiang recently criticized Western efforts to shrink China’s role in global supply chains, emphasizing the importance of interdependence.

Yellen aims to expand on her previous comments about maintaining healthy economic ties between the world’s two largest economies, even amidst national security concerns. She plans to meet with U.S. companies operating in China and engage directly with the Chinese people during her visit.

The trip also provides an opportunity for Yellen to gain insight into how Chinese President Xi Jinping’s new team is handling the country’s mounting economic challenges. China’s economic growth has slowed in recent weeks, with weak consumer spending and declining export orders. The overbuilt property sector, which previously drove growth, is no longer a significant contributor, and demographic factors, such as a shrinking working-age population, are impacting the outlook.

Chinese authorities are under pressure to stimulate the economy, but their ability to rescue global prospects is limited. The World Bank has revised its forecast for global economic growth to a modest 2.1 percent this year, down from 3.1 percent in 2020.

Yellen’s visit is part of a diplomatic offensive that began with a meeting between President Biden and Xi in November 2020. The initiative aims to rebuild sustained lines of communication between the two countries, which have been lacking in recent years. The Trump administration rejected regular U.S.-China dialogues, while the Biden administration initially delayed reviewing Trump-era tariffs and implemented tough policies restricting the sale of computer chips to China.

Yellen’s discussions in Beijing are not expected to result in any breakthroughs or concrete agreements. The administration’s ambitions are more modest compared to previous U.S.-China initiatives. However, the significance lies in the resumption of dialogue and the rebuilding of relationships between officials from both countries.

While Yellen is likely to receive a warm welcome in Beijing, there will be points of friction. U.S. companies operating in China have raised concerns about arbitrary government actions, and Chinese officials may question the administration’s plans to issue regulations limiting outbound U.S. investment in Chinese technology development.

The administration’s goal of reducing reliance on Chinese suppliers may also cause tensions. The Chinese government views the U.S. de-risking strategy as a form of decoupling that would harm both economies. However, China itself has been emphasizing self-reliance and reducing its dependence on imported goods and services.

Yellen’s visit to Beijing is a crucial step in the Biden administration’s efforts to improve relations with China while pursuing its economic strategy. Although no major breakthroughs are expected, the resumption of high-level talks and the rebuilding of communication channels are seen as positive developments in the strained U.S.-China relationship.

What potential areas of friction exist between the US and China, particularly in terms of arbitrary government actions and regulations limiting outbound US investment in Chinese technology development

Rcent in 2022, citing China’s economic slowdown as a contributing factor.

Yellen’s visit is part of a strategic diplomatic approach focused on fostering sustained communication and relationship-building with Chinese officials. While the administration’s goals are more restrained compared to previous U.S.-China initiatives, the significance lies in the fact that they are actively engaging and working towards establishing a constructive dialogue.

However, there are potential areas of friction between the two countries. U.S. companies operating in China have raised concerns about arbitrary government actions, and the implementation of China’s new counterespionage law could complicate normal business information-gathering. Chinese officials are also likely to seek clarification on the administration’s plan to impose regulations limiting outbound U.S. investment in Chinese technology development.

Overall, Yellen’s visit is not expected to yield immediate breakthroughs or concrete agreements in the U.S.-China relationship. The primary focus is on building open lines of communication and relationships, which have been strained in recent years.