Yellen’s High-Stakes China Visit Tests Her Diplomacy
Yellen’s High-Stakes China Visit Tests Her Diplomacy
At the beginning of 2021, when she was being considered for the position of Treasury Secretary, Janet L. Yellen took a combative stance towards China. She called the country “the most important strategic competitor” for the United States of America, and she pledged to take action against China‘s “abusive, unfair, and illegal practises,” which she claimed were hurting businesses and workers in the United States.
Since that time, Ms. Yellen has established herself as a voice of moderation inside the administration of Vice President Joe Biden. She has taken on the mantle of economic pragmatism at a time when the global economy is struggling with inflation and slow growth. The Secretary of the Treasury has voiced his opposition to China’s record on human rights, advocated for the diversification of supply chains in the United States, and emphasised that safeguarding national security is of the utmost importance.
She has been the administration’s most outspoken advocate for preserving economic relations with China, advocating against tariffs, recommending caution on new limitations on investment in China, and most recently issuing a warning that disconnecting the two economies would be “disastrous.” However, she has also been the administration’s most outspoken advocate for maintaining economic ties with the European Union.
Ms. Yellen will be negotiating these competing interests in real time during her visit to Beijing, which is scheduled to begin on Thursday and last for a total of four days. As Ms. Yellen strives to relieve years of festering mistrust between the United States and China, this trip, her first as Treasury secretary, is the most daunting test of economic diplomacy that she has faced to far.
Ms. Yellen will face a difficult job when she attempts to persuade her Chinese colleagues that the multitude of steps taken by the United States to prevent access to critical technology in the name of national security, such as semiconductors, are not designed to do damage to the Chinese economy. This will not be an easy task because both nations are always putting up new roadblocks in the way of commerce and investment.
The Biden administration is working on implementing a number of additional limitations on the transfer of technological goods between the United States and China. These restrictions may include potential restrictions on sophisticated semiconductors as well as on investment by the United States in China. According to persons familiar with the situation,
forthcoming guidelines are also likely to place limitations on the access that Chinese firms have to cloud computing services offered by the United States. This will be done in an effort to address a loophole in restrictions that were previously placed on China’s access to sophisticated semiconductors used for artificial intelligence.
This week, Beijing said that it would prohibit the export of some vital minerals needed in the fabrication of specific chips as a form of retaliation against the constraints that the Biden administration had placed on semiconductors. These limits had been imposed by the United States.
Ms. Yellen met with Xie Feng, China’s ambassador to the United States, on Monday in Washington, ahead of her trip, and laid out “issues of concern” in what the Treasury Department described as a candid talk between the two of them. According to a description of the call that was given by the Chinese Embassy, Mr. Xie provided an explanation of China’s complaints to the trading practises of the United States and asked the United States to take action to rectify those objections.
In her meetings in Beijing, Ms. Yellen is expected to make the case that the actions taken by the Biden administration to make the United States economy less reliant on China and to entice more production of critical materials inside the United States are narrowly focused measures that are not meant to instigate a wider economic war between the two countries.
This is the expectation that comes with Ms. Yellen’s trip to Beijing. Because China is the United States’ third-largest trade partner and continues to hold roughly one trillion dollars of U.S. debt, a sudden breaking of relations between the two nations would likely have catastrophic effects not just on their own economies but also on the economy of the whole world.
Tim Adams, the head of the Institute of International Finance and a former assistant secretary for international affairs at the Treasury Department, was recently quoted as saying, “I think she is going to go as the sober voice of reason to say that this is not about containment.” “What it really comes down to is setting the tone of cooperation and demonstrating that the United States is still interested in being engaged with China on trade and investment,”
Throughout the course of the last several decades, the United States Department of the Treasury has been the American government department that has made the greatest efforts to preserve amicable ties with China. Wall Street businesses, an important constituent group for the department, exerted significant effort during the 1990s in the hope of gaining entry to the Chinese market via China’s efforts to join the World Trade Organisation (WTO). After China became a member of the WTO in 2002, businesses on Wall Street and the United States Treasury Department began to put pressure on China to open its markets more rapidly.
As part of a series of concessions made in a failed attempt to head off a trade war with the Trump administration, Beijing ultimately agreed in November 2017 to let foreign investors to have substantially greater holdings in insurance, banking, and securities industries. This was one of several concessions made as part of a series of concessions made by Beijing.
Despite the fact that this is Ms. Yellen’s first trip to Beijing in her capacity as Treasury secretary, she is quite familiar with China. She met with officials from China’s central bank at international events while serving as chair of the Federal Reserve from 2014 to 2018. Prior to that, she served as president of the Federal Reserve Bank of San Francisco, a job in which she maintained consistent communication with Chinese government representatives.
