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US, China discuss economic issues on Yellen’s China tour

U.S. Treasury Secretary Janet Yellen attends a press briefing at the Guangdong Zhudao Guest House, in Guangzhou, Guangdong province, China, April 6, 2024.
U.S. Treasury Secretary Janet Yellen attends a press briefing at the Guangdong Zhudao Guest House, in Guangzhou, Guangdong province, China, April 6, 2024.

The United States and China have agreed to hold talks and create two economic groups focused on a wide range of issues — including addressing American complaints about China’s economic model, growth in domestic and global economies and efforts against money laundering — according to a statement released Saturday by the U.S. Treasury Department.

The agreement comes on the second day of an official visit to China by U.S. Treasury Secretary Janet Yellen, during which she has urged Chinese leaders to change their domestic manufacturing policies.

The two sides are set to hold “intensive exchanges” on cultivating more balanced economic growth and combating money laundering.

Yellen said the efforts would establish a structure for Beijing and Washington to exchange views and address Chinese industrial overcapacity, its ability to supply more product than is demanded.

“I think the Chinese realize how concerned we are about the implications of their industrial strategy for the United States, for the potential to flood our markets with exports that make it difficult for American firms to compete,” she told journalists after the announcement Saturday.

Yellen was en route to Beijing after beginning her five-day visit in the southern city of Guangzhou, which is a key manufacturing and export center for China.

While the issue of China’s industrial overcapacity will not be resolved instantly, Yellen said Chinese officials understand it’s an “important issue” for Americans, adding that her exchanges with Chinese Vice Premier He Lifeng will facilitate a discussion around macroeconomic imbalances and their connection to overcapacity.

China’s state-run Xinhua news agency reported Chinese officials “comprehensively responded” to the issue of industrial overcapacity raised by the Americans. “Both sides agreed to continue to maintain communication,” an official readout said.

The announcement came a day after Yellen urged Beijing to reform its trade practices and create “a healthy economic relationship” with the U.S. It also follows Chinese state media’s warning that Washington may consider rolling out more protectionist policies to shield U.S. companies.”

Some analysts say the announcement reflects Yellen’s effort to push forward on collaboration in areas the U.S. and China agreed on during U.S. President Joe Biden and Chinese leader Xi Jinping’s San Francisco summit last November.

“When Xi met Biden in November, they agreed to set up working groups, so Yellen is continuing to push that forward with the meeting,” Dexter Roberts, director of China affairs at the University of Montana's Mansfield Center, told VOA by phone.

While he called the announcement a positive development, Roberts said he does not think Beijing and Washington will reach agreement on contentious trade issues during Yellen’s trip.

“There could be temporary things like China easing off on subsidizing electric vehicles a bit, but it’s unclear how either side is going to change what's happening in a way that allows the tension over trade to lessen,” he said.

Beijing’s displeasure

While Washington highlighted threats posed by China’s industrial overcapacity, Beijing focused on its concerns about U.S. export controls on Chinese companies during the meeting between Yellen and He.

“The Chinese side expressed serious concerns over Washington’s restrictive economic and trade measures against China,” read the Chinese readout published by Xinhua.

Some experts say the United States and China could make progress on U.S. export restrictions on Chinese companies.

“Some U.S. businesses are calling for the government to remove some of the export restrictions, especially for chips [integrated circuits],” Victor Shih, director of the 21st Century China Center at the University of California in San Diego, told VOA by phone.

Since China is either already making, or is on the cusp of making, some of the computer chips on the sanctions list, Shih said he thinks restricting U.S. companies from selling some of the chips to China will only hurt American interests. “It’s really not hurting China that much,” he said.

In addition to U.S. controls on exports to Chinese entities, Shih said the other big topic Chinese officials are likely to raise in meetings with Yellen is potential tariffs Washington may impose on Chinese products.

“Since China is the largest exporter in the world, it’s not in its interest for there to be a lot of tariffs around the world, especially for major importers like the U.S.,” he said, adding that talking to Washington about lowering tariffs and not enacting new ones will be an important agenda item for Beijing.

While she has not explicitly promised to impose new sanctions on Chinese products, Yellen said she would not rule out the possibility of adopting more measures to safeguard the American supply chain for electric vehicles, batteries or solar panels from heavily subsidized Chinese green energy products.

During a phone call Tuesday with Biden, Xi warned that if the United States is “adamant on containing China's high-tech development and depriving China of its legitimate right to development, China is not going to sit back and watch.”

Bilateral communication

Despite persistent differences over contentious trade issues, Yellen and He underscored the importance for China and the U.S. to “properly respond to key concerns of the other side” to build a more cooperative economic relationship.

“It also remains crucial for the two largest economies to seek progress on global challenges like climate change and debt distress in emerging markets in developing countries, and to closely communicate on issues of concern such as overcapacity and national security-related economic actions,” Yellen said Friday.

Based on Yellen and He’s comments and signals from the Biden-Xi call Tuesday, some analysts say the U.S. and China will continue to put guard rails around the bilateral relationship to prevent it from further deteriorating.

“The two sides have come to the realization that they will have to live together, perhaps uncomfortably at times,” said Zhiqun Zhu, an expert on Chinese foreign policy at Bucknell University.

While the relationship will remain highly competitive, Zhu said he thinks Beijing and Washington will “stay engaged and seek cooperation in areas of common interest.”

“Maintaining stability is the priority for both Xi and Biden now,” he said.

Yellen is scheduled to have meetings with other senior officials Sunday and Monday in Beijing.