Yellen: U.S. seeking ‘constructive and fair’ economic relationship with China

The U.S. is seeking a “constructive and fair” economic relationship with China but will push back against actions that do not align with its national security interests, according to Treasury Secretary Janet Yellen.

In her public speech at Johns Hopkins University's School of Advanced International Studies on Thursday, Yellen acknowledged that the United States – China relationship is currently “at a tense moment.” Several national security issues, including the Ukraine war and U.S. export bans on advanced tech to China, have heightened tensions between the two countries over the past few years.

“My goal is to be clear and honest, to cut through the noise and speak to this essential relationship, based on sober realities,” she said.

Yellen, who is also a former Federal Reserve chair, said the U.S. actions against China were not to gain a competitive economic advantage and instead were motivated by various concerns, including Beijing’s “aggressive” method to boost its economy.

In recent years, China has increased support for state-owned companies and domestic private businesses to beat foreign competitors. Washington claimed that Beijing used “illicit means,” including intellectual property theft, to dominate the market.

The U.S. has also voiced concerns about China’s tighter political ties with Russia. According to Yellen, China’s “no limits” partnership with Russia showed a “worrisome” sign that it is not committed to ending the conflict in Ukraine. She said China and other nations should not provide Russia with material support or other forms of assistance in the war, justifying sanctions that the West imposed on its adversaries.

"It is essential that China and other countries do not provide Russia with material support or assistance with sanctions evasion."

Janet Yellen, Secretary of U.S. Treasury Department

The Biden administration believes that economic competition with fair regulations would benefit the two countries in the long run, according to Yellen. She added that it would increase product quality and price competitiveness among American and Chinese business entities.

In her speech, Yellen also reminded China about its promise to work with the U.S. on global macroeconomic issues and other urgent challenges, such as climate change. China remains one of the biggest contributors to global carbon emissions, accounting for 27 percent of global carbon emissions in 2022, according to the World Bank.

Yellen discussed a plan to travel to Beijing "at the appropriate time" to meet with Chinese authorities to “responsibly” manage the bilateral relationship but she did not provide details on the timing of the trip.

IMF warns against ‘new Cold War’

Last week, International Monetary Fund (IMF) managing director Kristalina Georgieva discussed the risk of a “new Cold War” as policymakers worldwide enhanced efforts to protect their industrial supply chains amid rising geopolitical tensions between major global powers.

According to the IMF, geopolitical tensions will lead to a fragmentation of the global economy and can lower global economic output by 0.2 percent to seven percent. The international body predicts that the global economy will see low economic growth in the next few years.

A new IMF working paper also showed that rising tensions could increase cross-border capital outflows, with higher risks for developing economies and emerging markets. Georgieva further explained that the middle class in every country would “pay a price” if policymakers did not make an effort not to go “overboard.”

Several countries have argued about the importance of securing national supply chains, including France. French Finance Minister Bruno Le Maire said the European Union and U.S.’s efforts to reduce their dependence on China was an effort to “de-risking” their supply chains and not “de-coupling” from Beijing. Le Maire said developed economies still needed to engage with China to solve global issues like climate change and debt relief.

A senior official at the U.S. Treasury Department also said China contributed to global economy fragmentation by making vast sectors of its economy “off-limit” to foreign competition. The unnamed official said China could rise rapidly by “bifurcating” itself from global’s open market policies.