Yellen to Visit China in Bid to Steady Economic Ties

Treasury Secretary Janet L. Yellen will travel to China on Wednesday, a high-stakes visit that is intended to help stabilize the fraught relationship between the world’s two largest economies.

The trip to China will be Ms. Yellen’s first as Treasury secretary and follows Secretary of State Antony J. Blinken’s visit last month. It comes at a moment of tension between the United States and Beijing following the discovery of a Chinese spy balloon traversing America earlier this year and Chinese frustration with the Biden administration’s efforts to block China from accessing certain sensitive technologies.

The trip also coincides with a moment of heightened uncertainty for the global economy, with China’s post-pandemic output flagging and the United States trying to avoid a recession while containing inflation.

Despite hopes of re-establishing dialogue, the meetings are likely to cover sensitive issues that have been festering for years.

The Biden administration has been taking steps to reduce America’s reliance on Chinese imports and has sought to limit China’s access to semiconductors, biotechnology and sensitive technology that powers things like robotics, artificial intelligence capabilities and high-end computing.

At the same time, China has frustrated the United States with its reluctance to renegotiate the terms of loans it is owed by poor countries facing default and has maintained close economic ties with Russia despite that country’s invasion of Ukraine.

A senior Treasury Department official, who spoke on the condition of anonymity about the priorities for the trip, said on Sunday that Ms. Yellen would meet with top Chinese officials and American companies doing business in China. The official said that Ms. Yellen would talk to her Chinese counterparts about global challenges and mutual areas of concern.

The Treasury secretary is expected to raise objections to China’s recent ban aimed at Micron Technology, the U.S.-based manufacturer of memory chips used in phones, computers and other electronics. The Chinese government in May barred companies that handle critical information from buying microchips made by Micron, after the Biden administration recently took steps to bar Chinese chip makers from gaining access to crucial tools needed to make advanced chips. The company’s chips, which are used for memory storage in all kinds of electronics, like phones and computers, were deemed to pose “relatively serious cybersecurity problems” by China’s internet watchdog after a review.

Ms. Yellen is also expected to express concerns about human rights violations related to China’s treatment of ethnic minorities in Xinjiang, where the Chinese government has been accused of mass detention of Muslims. American officials are also hoping to gain a better understanding of the scope of China’s new counterespionage law, which could present new challenges for foreign companies.

While grievances are likely to be aired by both sides, Ms. Yellen intends to make the case that U.S. actions to become less reliant on China and protect its national security are not intended to “decouple” the two economies, which are highly intertwined.

Ms. Yellen has sounded a softer tone toward China in recent weeks, describing the relationship between Washington and Beijing as important for the entire world. In an interview with MSNBC last week, she suggested that “healthy competition” could benefit workers and businesses in both countries.

“My hope in traveling to China is to re-establish contact,” Ms. Yellen said. “There are a new group of leaders, we need to get to know one another.”

She added that the two nations “need to discuss our disagreements with one another so that we don’t have misunderstandings, don’t misunderstand one another’s intentions.”

The Treasury secretary is likely to field pointed questions from her counterparts about the Biden administration’s intentions amid concerns in China that America’s actions do not match its words.

The administration has imposed sweeping restrictions on China’s access to advanced technology, saying that Beijing’s ability to use such technology poses a national security threat to the United States.

In remarks last Wednesday at the Council on Foreign Relations in New York, Mr. Blinken said it was in America’s interest to keep Beijing from gaining access to technology that could be used to harm the United States.

“How is it in our interest to allow them to get technology that they may turn around and use against us?” he asked, citing China’s expanding nuclear weapons program, its development of hypersonic missiles and its use of artificial intelligence “potentially for repressive purposes.”

“If they were in our shoes, they would do exactly the same thing,” he said, adding that the U.S. was imposing “very targeted, very narrowly defined controls.”

The White House has also been preparing new investment restrictions aimed at curtailing American dollars used to finance the development of advanced technologies within Chinese borders.

And while Ms. Yellen has in the past questioned the efficacy of tariffs on Chinese imports, the levies imposed by the Trump administration remain in place and seem unlikely to be rolled back anytime soon.

China has also expressed frustration with America’s efforts to reorient its supply chain away from China and toward other countries the United States considers allies — a trend Ms. Yellen and other cabinet officials have called “friendshoring.”

For its part, the United States continues to be frustrated by China’s reluctance to allow poor countries that are facing default to restructure the terms of their loans, and has concerns about China’s weakening currency, which makes its exports more competitive in the United States.

In addition to the currency tensions, China is struggling with debt troubles at home and abroad. The debt crisis in developing countries is coming at a bad time for China. As a slow-motion housing crisis unfolds, many banks already face the potential for heavy losses on their loans to real estate developers and to the financing units of local governments. That leaves them leery of accepting heavy losses on overseas loans, even as Western experts predict that developing countries may not be able to recover without significant debt relief.

American officials had very limited contact with Chinese officials through the pandemic, when China almost completely closed its borders and stopped sending its officials to international economic gatherings. China has also gradually halted the release of thousands of economic data series over the last several years as part of a national security campaign, and that has made it even harder for American officials to understand what is happening in the Chinese economy.

In a sign of how seriously Beijing is taking Ms. Yellen’s visit, China on Saturday named a new Communist Party secretary to lead the country’s central bank: Pan Gongsheng, a prominent technocrat who has overseen China’s currency policy since 2016 as director of the State Administration of Foreign Exchange.

Ms. Yellen and her team “will likely try to get more insights into the Chinese economy as it gets more opaque,” said Christopher Adams, a former senior coordinator for China affairs at the Treasury Department.


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