Yellen China visit: The world is big enough for US and China, US treasury secretary says

Beijing/Hong Kong

The world is big enough for both the United States and China to thrive, US Treasury Secretary Janet Yellen said Sunday as she wrapped up a visit to Beijing aimed at stabilizing the relationship between the world’s two largest economies.

Yellen said she had “direct, substantive, and productive” talks with China’s new economic leadership, including Premier Li Qiang and Pan Gongsheng, the newly appointed Communist Party chief of China’s central bank.

“No one visit will solve our challenges overnight. But I expect that this trip will help build a resilient and productive channel of communication,” Yellen told a news conference in Beijing.

“Broadly speaking, I believe that my bilateral meetings — which totaled about 10 hours over two days — served as a step forward in our effort to put the US-China relationship on surer footing.”

China’s Deputy Finance Minister Liao Min said in a statement Sunday the two sides held “long and candid” meetings and would “maintain communication” in the future.

Yellen’s trip marked the second visit by a US cabinet official to the Chinese capital in a matter of weeks as Washington seeks to steer relations with Beijing back on course after months of inflamed tensions.

Yellen speaks to reporters  at the US embassy in Beijing on Sunday at the conclusion of her trip.

In recent months, while pushing to resume high-level diplomatic talks, the US has imposed sanctions on Chinese companies, successfully pushed allies in Japan and the Netherlands to restrict sales of advanced semiconductors to China and rallied other advanced economies to counter Beijing’s “economic coercion.”

But Yellen reiterated that the United States is not seeking to decouple from China, which she said would be “disastrous for both countries and destabilizing for the world” and “virtually impossible to undertake.”

“There is an important distinction between decoupling, on the one hand, and on the other hand, diversifying critical supply chains or taking targeted national security actions,” she said.

She said the United States would continue to take “targeted actions” to protect its own national security interests and those of its allies, while making sure these actions are “transparent, narrowly scoped and targeted to clear objectives.”

Following Yellen’s meeting with China’s Vice Premier He Lifeng Saturday, a report from the official Xinhua news agency appeared to suggest the Chinese side took issue with this approach.

“China believes that generalizing national security is not conducive to normal economic and trade exchanges,” it said. “The Chinese side has expressed concerns about US sanctions and restrictive measures against China.”

Yellen said the US and China have “significant disagreements” that need to be communicated “clearly and directly,” but noted that the Biden administration does not see US-China relations “through the frame of great power conflict.”

“We believe that the world is big enough for both of our countries to thrive. Both nations have an obligation to responsibly manage this relationship: to find a way to live together and share in global prosperity,” she said.

Yellen said she pressed Chinese officials on Washington’s “serious concerns about China’s unfair economic practices” — including barriers to market access for foreign firms and issues involving intellectual property — and “worries about a recent uptick in coercive actions against American firms.”

Beijing’s updated counter-espionage law and crackdown against Western consulting and due diligence firms have unnerved US businesses.

Over the past months, Chinese authorities have questioned staff at the Shanghai office of US consultancy Bain & Company, and closed the Beijing office of Mintz Group, an American corporate due diligence firm, while detaining five of its local staff.

Yellen said no final decision has been made to limit outbound investments by US companies in China, when asked about potential upcoming foreign investment curbs that might be implemented by Washington.

“I was able to explain to my Chinese counterparts that if we do implement such restrictions, that we will do so in a transparent way,” she said, adding any new curbs or sanctions would “be highly targeted and clearly directed narrowly at a few sectors where we have specific national security concerns.”

“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,” she said.

The Biden administration is preparing new rules that could restrict US investment in certain sectors in China, according to multiple media reports including from the The Wall Street Journal and Politico.

Yellen said she discussed with Chinese officials areas of cooperation on global challenges, including working together to mobilize multilateral financing for climate action. US climate envoy John Kerry is expected to visit China next, according to US Ambassador to China Nicholas Burns, though he did not provide a timetable for the trip.

Yellen said she also raised “the importance of ending Russia’s brutal and illegal war against Ukraine,” and said it was “essential” that Chinese firms avoid providing Russia with material support for the war or in evading sanctions.

Yellen’s trip followed another high-profile visit to Beijing by US Secretary of State Antony Blinken in June. Compared to Blinken, she appears to have received a warmer welcome –— and more positive reporting in Chinese state media.

When Yellen landed in Beijing Thursday, she was greeted by a smiling Chinese official who pointed toward a rainbow that had appeared in the sky, according to a video circulated widely on Chinese social media.

The rainbow was mentioned again by China’s Premier Li during their Friday meeting as a sign of hope for improvement in relations.

“Aren’t China-US relations like this too?” Li said. “After the storm, we will definitely see more rainbows.”

In addition to the official meetings, Yellen’s preferred choice of food has received plenty of attention in China.

A Beijing restaurant specializing in spicy cuisine from the southwestern province of Yunnan has seen a surge in customers after it shared photos of Yellen’s delegation having dinner there on Thursday night, their first meal after landing.

Yellen’s group liked the wild mushrooms so much, they ordered four dishes made with them, the restaurant said in a Weibo post Friday.

Following her visit, wild mushroom dishes at the restaurant’s branches across China sold out, it said in a later post.

Yellen, the first woman to head the US Treasury, also invited a group of Chinese women economists for lunch Saturday.

“Our people share many things in common, far more than our differences,” Yellen told her guests, according to a readout from the US Treasury.

“I know we share similar stories and experiences about what a career in economics is like, and the challenges you can face when you’re the only woman in the room or at the decision-making table.”

In a Twitter post, Qian Liu, managing director of Greater China at the Economist Group who attended the lunch, called Yellen “an inspirational role model.”

Yellen’s trip came just days after China retaliated in a tech war with the US by announcing restrictions on exports of two strategic materials needed to make semiconductors.

The move was widely seen as a response to the Biden administration’s ban on advanced chip sales to China, which was announced last October. According to multiple media reports, the curbs will be expanded to restrict the sale of some artificial intelligence chips.

The sanctions strike at the heart of Beijing’s tech ambitions, as chips are vital for everything from smartphones, self-driving cars, and advanced computing to weapons manufacturing.

Jake Werner, an East Asia Research fellow at the Quincy Institute in Washington, said it was unlikely Yellen’s Chinese counterparts would be persuaded by her argument that the US ban is not meant to stifle China’s economy.

“US and Chinese leaders alike consider these technologies foundational to the future of growth. Chinese leaders see the restrictions as an attempt to permanently subordinate China to US power and to coercively exclude Chinese business from the most important industries of the future,” Werner said.

“This issue will continue to be one of the most poisonous areas of contention within the relationship.”

A former Chinese official has indicated that further retaliatory measures may be on the cards.

Even as both Beijing and Washington indicate high-level discussions will continue, the thorniest aspect of bilateral ties — particularly the tussle over access to advanced technology — may fuel more tension in the relationship.