Janet Yellen faces a diplomatic test on her visit to China

In early 2021, Treasury Secretary Janet L. Yellen described China as America’s most important strategic rival and vowed to confront its “wrongful, unfair and illegal practices.” In America.

Since then, as the global economy grapples with inflation and sluggish growth, Ms. Yellen emerged. The Treasury secretary has voiced objections to China’s record on human rights, called for diversification of US supply chains and acknowledged that protecting national security is paramount.

But he has also been a key supporter of the administration, which has maintained economic ties with China, argued against tariffs, urged caution over new restrictions on investment in China and, most recently, warned that cutting off the two economies would be “disastrous.”

During a four-day visit to China, Mrs. Her first trip to the country as Treasury secretary represents the most challenging test of Ms. Yellen’s economic diplomacy to date as she seeks to ease years of mistrust between the United States and China.

The Treasury secretary arrived Thursday afternoon and was greeted at Beijing’s airport by Yang Yingming, director general of China’s Ministry of Finance, and US Ambassador to China R. Nicholas Burns.

During his first full-day meeting on Friday, he will meet China’s former vice-premier Liu He and former governor of the People’s Bank of China Zhou Xiaochuan. Later on Friday, Ms. Yellen will meet with Premier Li Qiang at the Great Hall of the People. The Treasury Secretary will participate in a roundtable discussion with American Chamber of Commerce officials in China to hear about the challenges facing American companies in China.

Ms. For Yellen, the challenge will be convincing her Chinese counterparts that U.S. measures to block access to sensitive technology like semiconductors in the name of national security are not aimed at harming the Chinese economy. That won’t be easy, as both countries are creating new barriers to trade and investment.

The Biden administration is preparing several new restrictions on U.S. technology trade with China, including potential limits on advanced chips and U.S. investment in the country. In an attempt to close a loophole in previous restrictions on China’s access to advanced chips used for artificial intelligence, the upcoming rules would limit Chinese companies’ access to U.S. cloud computing services, according to people familiar with the matter.

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Beijing this week retaliated against the Biden administration’s restrictions on semiconductors, announcing restrictions on exports of some key minerals used in the production of some chips. A senior Treasury official, speaking on condition of anonymity, said this week that Ms. Yellen said restrictions could be discussed during meetings. The move is an example of why diversified supply chains are important, the official added.

On Monday, ahead of her trip, Ms. Yellen met with Xie Feng, China’s ambassador to the United States, in Washington and raised “issues of concern” in what the Treasury Department described as a candid conversation. According to a summary of the conversation released by the Chinese embassy, ​​Mr. Xie explained and urged the United States to take action to resolve them.

In her meetings in Beijing, Ms. Yellen is expected to say the Biden administration’s actions are aimed at making the U.S. economy less dependent on China and more production of critical goods inside the U.S. would trigger a wider economic war. China continues to hold nearly $1 trillion in U.S. debt and is America’s third-largest trading partner, an abrupt severing of ties that could be disastrous for both countries and the global economy.

“I think she’s going to be the calming voice to say it’s not about control,” he said Tim Adams, President and Chief Executive of the Institute of International Finance and former Treasury Secretary for International Affairs. “It really sets the tone for cooperation and shows that the United States is interested in engaging with China on trade and investment.”

Over the past several decades, the Treasury has consistently been a US government agency that has tried hard to maintain friendly relations with China. Wall Street firms, a key constituent of the sector, sought in the 1990s to gain access to the Chinese market through China’s negotiations to join the World Trade Organization. After China joined the World Trade Organization in 2002, Wall Street firms and the Treasury Department pressured China to move faster in opening up its markets.

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Beijing finally agreed in November 2017 to allow foreign investors to hold much larger stakes in insurance, banking and securities businesses as part of a failed bid to end a trade war with the Trump administration.

Although this is her first trip to Beijing as Treasury Secretary, Ms. Yellen is no stranger to China. In his role as president of the Federal Reserve Bank of San Francisco, he regularly interacted with Chinese officials, and as Fed chairman from 2014 to 2018, he would meet with China’s central bank officials at international meetings.

Ms. Yellen’s credentials as an academic economist have made her a welcome ambassador in Beijing.

“They really like her because she sees the world in economic terms, and they’re very comfortable with it,” said Craig Allen, president of the U.S.-China Trade Council.

Michael Pillsbury, a senior fellow for China strategy at the Heritage Foundation, said Chinese officials see Ms Yellen as a voice of reason and believe she can do what America needs to do for others in the Biden administration. Withdrawal from new investment restrictions and withdrawal of fees.

Mr. who was a top adviser to China in the Trump administration. “They want Janet to help,” said Pillsbury. “They see her as a friend of China.”

Mrs. Yellen has not had a direct trade policy, but President Donald J. He has criticized Trump’s tariffs on more than $300 billion in Chinese imports.

“Tariffs are Taxes on Consumers,” Ms. Yellen told the New York Times in 2021. “It seems to me that in some cases we hurt the American consumer, and the type of deal that the previous administration negotiated was not really addressed. In many ways those are the fundamental problems we have with China.”

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Those tariffs are being reviewed by the US Trade Representative’s office and Ms Yellen acknowledged that they are unlikely to be rolled back anytime soon.

Forging deeper ties with Beijing, Ms. Yellen’s ability may be complicated by the current political moment.

Concerns about China have grown after a spy balloon flew over the US before being shot down over the Atlantic Ocean. The upcoming presidential election is likely to increase anti-China rhetoric as candidates portray themselves as strongly anti-China, often a successful campaign message. And Republicans have been critical of America’s overreach to China.

Last month, Secretary of State Anthony J. Ms. Yellen’s visit follows Blinken’s visit. Special Climate Envoy John F. Kerry is expected to travel to Beijing soon.

Rep. Mike Gallagher, Republican of Wisconsin, who chairs the House Select Committee on the Chinese Communist Party, accused the Biden administration of slow-moving export restrictions targeting Chinese telecommunications giant Huawei and sanctions against Chinese officials responsible for human rights abuses against Uyghurs. Xinjiang. He argued that China’s behavior worsened as the Biden administration continued its “zombie engagement” with the Chinese Communist Party.

“After Secretary Blinken leaves Beijing with little to show for his trip, doubling down by sending additional Cabinet-level officials like Secretary Yellen will only perpetuate this vicious cycle,” Mr. Gallagher said.

With Republican presidential candidates such as Nikki Haley warning that China is “preparing for war” with the United States, Ms. Yellen has an added urgency to find ways to keep communication open with her Chinese counterparts, even if her trip doesn’t pay off. Any major developments.

“The Chinese are very aware of the US election cycle, and that’s why they’re willing to be a little more open,” said Ishwar Prasad, former head of the International Monetary Fund’s China division. “Both Secretary Yellen and the Chinese want to return to a place where they see at least some parts of the economic relationship as a positive-sum game rather than a zero-sum game.”

Keith Bradsher Contributed report.

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