Yellen says US, China must address economic concerns 'directly'

Treasury Secretary Janet Yellen said the US and China should communicate "directly" on specific economic concerns, reiterating the need for improved exchanges between the two sides in her meetings with Chinese leaders. 

Beijing and Washington can make better decisions to strengthen their respective economies if they closely communicate and exchange views on various challenges amid a "complicated" global economic outlook, Yellen told her Chinese counterpart, Vice Premier He Lifeng.

"It is my belief that a wide swathe of our economies can interact in ways that are uncontroversial to both governments," Yellen said in prepared remarks at the meeting with He on Saturday. "The fact that despite recent tensions we set a record for bilateral trade in 2022 suggests there is ample room for our firms to engage in trade and investment."

Yellen urges China to support existing institutions to fight climate change

China and the US should join forces to tackle climate change, Yellen said earlier Saturday.

"Climate change is at the top of the list of global challenges, and the United States and China must work together to address this existential threat," Yellen said at a roundtable on sustainable finance in Beijing.

Despite increasingly adversarial relations between China and the US, Yellen has often argued that the two nations, as the world's two largest economies, have a duty to cooperate on major global challenges including environmental issues and debt distress in poorer nations.

"As the world's two largest emitters of greenhouse gases and the largest investors in renewable energy, we have both a joint responsibility – and ability – to lead the way," Yellen said at the Saturday morning gathering attended by Chinese and international climate experts.

Yellen is on her second day of meetings in Beijing, in a trip largely aimed at re-establishing communication channels between the two geopolitical rivals.

Saturday Engagements

Her meeting with He, arguably her most important engagement during her visit in Beijing, will be followed by a dinner.

Yellen met Chinese Premier Li Qiang on Friday, which a senior Treasury official said was a high-level discussion about the broader US-China relationship. Her meeting with He is more likely to touch on specific concerns by both sides, the official said.

In a report Friday evening, the official Xinhua News Agency said Li identified mutual benefit as the essence of US-China relations and that he called for more communication and strengthening consensus on bilateral economic issues. The two sides should have candid, deep and pragmatic talks, Xinhua reported the premier as saying.

In Beijing, Yellen is seeking to explain to her counterparts the US strategy she outlined in April that's geared toward defending and securing US national security without trying to hold China back economically. 

"The United States will take targeted actions to protect our national security," Yellen said at the start of the meeting with He. "While we may disagree on these actions, we should not allow that disagreement to lead to misunderstandings, particularly those stemming from a lack of communication, which can unnecessarily worsen our bilateral economic and financial relationship."

The US and China remain locked in a tit-for-tat trade war that ramped up last year with US export controls on semiconductors and chipmaking equipment.  

The Biden administration is preparing an executive order curbing US outbound investment in China, which could come as soon as July and cover certain investments in sensitive technologies including semiconductors, artificial intelligence and quantum computing. 

Meanwhile, President Xi Jinping's government imposed controls on two critical minerals used in advanced technologies days before Yellen's arrival. On Friday, she told a roundtable of US business people operating in China she was "concerned" by those curbs.  

Yellen's message to Chinese officials is that competition between the two countries is not a "winner-take-all" situation and both sides should manage their rivalry with a fair set of rules.

She reiterated those comments to He, saying "where we have concerns about specific economic practices, we should and will communicate them directly."

Treasury officials have downplayed expectations of any major breakthroughs during the trip, saying instead it is aimed at building longer-term communication channels with the Chinese government's new economic team. 

US-China engagement now is a shadow of what it once was. The Treasury secretary at one point would meet with China's equivalent every six months through the "Strategic Economic Dialogue," but such forums became defunct in the Trump administration, which levied a raft of import tariffs on Beijing. 

While the Treasury official said restoring this dialogue wasn't specifically discussed in Yellen's meeting so far, the talks with He could touch on how the two sides can set up frameworks to communicate appropriately.