China has called on the United States to take concrete actions to create a favorable environment for both sides to achieve mutual benefit.
Beijing hopes US Treasury Secretary Janet Yellen, a dovish American official who began a four-day trip to China on Thursday, will take home to President Joe Biden a message: There will be no winners in trade wars and an economic “decoupling.”
Following China’s unveiling earlier this week of export controls of gallium and germanium, raw materials of semiconductors, Yellen met with Chinese Premier Li Qiang at the Great Hall of the People in Beijing on Friday.
She told Li that the US seeks to have healthy economic competition, instead of a “winner-take-all” fight, with China, to benefit both countries over time. She also said that in certain circumstances the US would need to pursue targeted actions to protect its national security.
Yellen is the second high-ranking US official to visit China after US Secretary of State Antony Blinken met with Chinese President Xi Jinping in Beijing on June 19.
These talks were held against the backdrop of an intensifying chip war in which Japan and the Netherlands will restrict the exports of their chip-making raw materials and equipment to China on July 23 and September 1, respectively.
Media reports said last week that Washington will soon announce its plan to ban Nvidia from shipping its A800 and H800 artificial intelligence chips to China, and also restrict US funds from investing in China’s high-technology sectors later this month. To retaliate, China said Monday that it will require companies to apply for licenses to export gallium and germanium from August 1.
‘Seeing rainbow’
When Yellen arrived in Beijing on Thursday, she tweeted that she was going to “seek a healthy economic competition that benefits American workers and firms and to collaborate on global challenges.”
“We will take action to protect our national security when needed, and this trip presents an opportunity to communicate and avoid miscommunication or misunderstanding,” she said in the tweet.
Chinese officials and state media have so far used a more friendly tone to describe Yellen’s China trip than they did with Blinken’s.
“I am very happy to meet you in Beijing,” Li told Yellen at the beginning of their meeting on Friday. “Not only China and the United States, but also people in the whole world, are paying close attention to your visit to Beijing.”
“Yesterday, the moment you arrived at our airport and left the plane, we saw a rainbow,” he said. “I think it can apply to the US-China relationship too: after experiencing a round of winds and rains, we surely can see a rainbow.”
“I also often say to Chinese entrepreneurs that we always have to go through a difficult time,” he said. “When we say it’s bad this year, it can be worse next year. We must survive.”
He said Chinese enterprises must observe the world economy and look forward and cannot just look at the water under their feet on rainy days. He said this practice can also be applied in Sino-US relations.
Before a meeting with Li, Yellen had a “substantive conversation” with former Chinese Vice Premier Liu He and the outgoing governor of China’s central bank, Yi Gang, AFP reported. They discussed the global economic outlook and the respective economic outlooks for the US and China.
Equal relationship
On Friday, China’s Ministry of Finance said in a statement that Yellen’s visit to China is a concrete measure to implement the important consensus of last November’s Xi-Biden meeting. It said the trip will strengthen communication and exchanges in the financial area between the two countries.
“The essence of Sino-US economic relations is to achieve mutual benefit and win-win results. There will be no winners in trade wars and ‘decoupling’,” said an unnamed spokesperson of the Finance Ministry. “We hope that the US will take concrete actions to create a favorable environment for the healthy development of economic and trade relations between the two countries.”
Su Xiaohui, deputy director of the Department of American Studies at China Institute of International Studies, remarks in a video released on Friday that Yellen’s China trip was decided by both the US and China, was not a result of an invitation from China, meaning that Beijing is not asking the US for help in anything.
Su says the fact that Yellen will stay longer in China than Blinken means that both the US and China want to discuss matters in detail.
She says Beijing is willing to receive American officials as it feels that Washington has been aware that suppressing and containing China will have a negative impact on the US. She says Washington knows clearly that American firms want to see stable Sino-US relations.
“From China’s perspective, Yellen’s trip does not mean that the US can make demands on China, or that it can unilaterally pressure China and force it to compromise,” she says. “Her trip should emphasize that the development of the relationship between the two countries must be equal and mutually beneficial.”
She says Beijing’s statement of “no winners in trade wars” may touch Yellen, who had once questioned the Trump administration’s tariffs placed on Chinese imports. She says the United States’s so-called “de-risking” or “decoupling” from China does not fulfil the spirit of achieving mutual benefit and win-win results.
Diversification
In May, G7 leaders met in Japan and agreed that their members should “de-risk” from China. Beijing said there is no difference between “de-risking” and “de-coupling” as both will lead to the departure of foreign firms from China.
Yellen preferred to describe the United States’s strategy as “diversification.”
She told representatives of some China-based US firms in a Friday meeting that a decoupling of the US and Chinese economies would be “virtually impossible.”
“We seek to diversify, not to decouple. A decoupling of the world’s two largest economies would be destabilising for the global economy,” she said, adding that Washington was not seeking a “wholesale separation of our economies.”
Yellen said the US government is concerned by Beijing’s export controls on metals key to semiconductor manufacturing and is still evaluating the impact of these actions. She said the Chinese curbs reminded the US of the importance of building resilient and diversified supply chains.
“I also discussed concerns about barriers to market access, China’s use of non-market tools, and punitive actions against US firms,” she tweeted.
Luo Fuqiang, a military commentator, says in his latest vlog that he remains unconvinced that Washington will consider China’s interests and stop its suppression against China.
But he says US officials, who visit China, will continue to be received by higher-ranking Chinese officials as Beijing wants them to help send authoritative messages back to the US.
Some commentators say Beijing does not have high expectations for the outcome of Yellen’s trip as the US-China conflicts are related to the US Commerce Department and the Office of the United States Trade Representative, not the Treasury Department.
Read: China squeezes key metal supplies in chip war escalation
Follow Jeff Pao on Twitter at @jeffpao3