Treasury Secretary Janet Yellen will meet Chinese Vice Premier He Lifeng for talks Thursday and Friday meant to continue a cautious rapprochement on trade between the world’s two largest economies.
The meeting, which will take place in San Francisco, comes ahead of an anticipated meeting between President Joe Biden and Chinese President Xi Jinping later this month at the Asia-Pacific Economic Cooperation (APEC) forum.
For much of this year, U.S. officials have been working to improve trade and other relations between China and the United States.
Yellen and other senior administration officials have visited China. In September, Yellen and He created two “working groups” meant to provide a means for the two governments to engage in discussions about economic and financial policy. The working groups will meet again this week.
Troubled relationship
Relations between the United States and China have been significantly strained of late.
China accused the U.S. of actively attempting to suppress China’s economic growth. Among Beijing’s complaints is that the Biden administration has implemented a ban on the sale of certain high-tech goods to China, plans to further restrict outbound U.S. investment in China beginning next year, and has encouraged U.S. firms to diversify their sources of critical goods and raw materials in order to reduce U.S. reliance on Chinese imports.
For its part, the U.S. regularly complains that China’s policies are designed to give its domestic companies — especially manufacturers — an unfair advantage in global competition. The U.S. claims it does this by offering extensive government support to companies and by placing onerous restrictions on non-Chinese firms operating in China.
In the years prior to Biden taking office, former President Donald Trump launched a trade war with China that imposed new tariffs on many Chinese goods, most of which were left in place by the Biden administration.
Despite the strains, trade between the two countries remains robust, with the dollar value of total trade in goods at or near-record levels in recent years.
Progress seen as unlikely
Experts told VOA they do not anticipate any big breakthroughs this week.
“Quite frankly, I have pretty low expectations,” said Nicholas Lardy, a senior fellow at the Peterson Institute for International Economics. “There's a mismatch of expectations, I think. The Chinese agreed to set up these discussion bodies because they want to talk the United States into reducing some of the restrictions that have been imposed on technology transfer and financial flows. And I think the U.S. has no intention of doing that.”
“It's very good that they're talking, and maybe some better understanding of everything will emerge, but I'm not expecting anything dramatic,” Lardy said.
“My guess would be that we are likeliest to see incremental gains rather than breakthroughs in the economic relationship ahead of APEC,” Lily McElwee, deputy director and fellow in the Freeman Chair in China Studies at the Center for Strategic and International Studies, told VOA.
“Yellen has made it clear she will bring up China’s coercive and non-market-based economic practices when she meets with He, but I doubt Beijing will be looking to concede much before Xi and Biden meet — which in some ways is already seen as a concession, or at least Beijing doing its part to keep relations stable,” McElwee said.
Seeking healthy competition
In advance of the meeting later this week, Yellen published an op-ed Monday in The Washington Post laying out the U.S. position with regard to China, as well as her hopes for the meeting.
She said the U.S. is not engaged in efforts to suppress China’s economic growth, but that Washington simply wants “healthy competition” that can benefit both countries.
“But healthy competition requires a rules-based, level playing field,” Yellen wrote. “This week, I will speak to my counterpart about our serious concerns with Beijing’s unfair economic practices, including its large-scale use of non-market tools, its barriers to market access and its coercive actions against U.S. firms in China.”
Yellen also repeated that the U.S. has no interest in an economic “decoupling” of China and the U.S., which she said would be “economically disastrous and run counter to our national interests.” However, she said that the U.S. is making an effort to “diversify” its supply chain of critical goods, thereby reducing reliance on China in areas where their purchase had reached a level of “overconcentration.”
Yellen offered no sign that the U.S. will reconsider its restrictions on the export of sensitive technologies to China, but said the decisions that led to that policy were rooted in national security concerns, not in an effort to stifle China’s growth.
Economic shift
The high-level meetings take place at a time when China is struggling economically. An economic bounceback from the COVID-19 pandemic slowed sharply earlier this year, and a cascading crisis in the country’s real estate sector is dragging down the broader economy.
Recently, there have been signs that Beijing is embarking on a strategy of directing government investments into the manufacturing sector, hoping to spark growth. This is likely to renew U.S. concerns about China giving unfair advantages to domestic firms competing on the global market.
Whether or not an infusion of cash into the manufacturing sector will produce the results Beijing is seeking is an open question. In recent weeks, there has been a significant outflow of foreign funds from the Chinese economy, a signal that international investors and companies doing business in China have lost confidence.
“There is a reason foreign businesses are moving out of China,” said McElwee. “Discriminatory Chinese regulations are part of the problem, but so, too, are broader geopolitical uncertainties and questions about where Xi Jinping intends to take the country and economy.
“I don’t see incremental changes to regulations or policies changing this assessment,” she said. “And some of the reshoring/friendshoring/diversification of supply chains is simple risk management in ways that go beyond China. So yes, I think any moves that seem to promise greater state intervention in the economy in favor of domestic producers is likely to sour corporate sentiment further.”
