Janet Yellen, widely considered a moderate American politician who advocates engagement between China and the United States, is committed to fostering communication channels on economic and financial affairs and building a healthy and mutually beneficial economic relationship. Her second visit to China, which took place in April, less than a year since her first visit, has attracted significant attention at home and abroad.
One objective of her visit was to highlight the Biden administration's China policy, which seeks to make pragmatism a prerequisite for the development of relations between Washington and Beijing. By underscoring the importance of economic growth and trade, the administration wants to send a message to China that the relationship need not be defined by conflict.
The visit unveiled Washington's vision for the important relationship. Within the American administration, Yellen has defended her belief in the benefits of global trade. She once was the main voice within the administration that called for the reduction of some tariffs on Chinese imports, arguing that a complete decoupling of the two economies will have adverse global repercussions.This stands in contrast to other officials who favor more protectionist measures. For example, U.S. Trade Representative Katherine Chi Ta once told her subordinates that even though many officials had visited China, she did not want to be one of them, considering the difficulty of reaching a trade agreement. Yellen's second visit to China indicates that despite internal differences on her country's China policy, the current administration remains committed to quelling discord and charting a path forward.
Yellen's visit also facilitates cooperation on economic priorities. The treasury secretary occupies an important seat on the U.S. government's economic team, overseeing economic decision-making, managing public debt, supervising taxation and acting as a bridge between government, financial markets and business.Historically, the secretary played a key role as Washington's special envoy to China. In 1999, after apologizing for the accidental bombing of the Chinese embassy during the Kosovo war — which sparked widespread protests in China — President Bill Clinton sent Treasury Secretary Larry Summers to China and promised to help China join the World Trade Organization and facilitate negotiations between the two countries. In 2008, Treasury Secretary Henry Paulson was able to persuade China to cooperate closely with the United States to safeguard China's U.S. debt holdings and jointly respond to the financial crisis.During Yellen's recent visit to China, the two countries solidified cooperation and exchanges on various fronts, including fostering balanced domestic and global economic growth, enhancing cooperation against money laundering, strengthening financial stability, addressing climate change and resolving debt challenges of developing countries.
In addition, the visit showed that stable communication channels can sometimes be more important than concrete results. In a written statement, National Security Adviser Jake Sullivan said Yellen has established effective channels with China's economic leaders, allowing the United States to better communicate serious concerns and intentions regarding policy actions and contributing to the overall U.S. goal of responsibly managing economic competition. This also demonstrates the Biden administration's belief that even if Yellen's talks with China failed to lead to broad policy adjustments by both countries, her trip was still worthwhile in helping to reduce the possibility of retaliatory cycles, to avoid the escalation of conflicts and to coordinate responses to economic challenges.
At the same time, Yellen's visit focused on the issue of overcapacity in China. This shows that pragmatism is prominent in the way the U.S. interacts with China — aiming to not only manage differences and strengthen cooperation but also with controlled conflict.
Her visit also demonstrates the U.S. double standard on China's economic policies. Yellen emphasized that Washington's interventions in the economy are motivated by national security concerns. “These national security actions are not designed for us to gain a competitive economic advantage,” she said. “They are driven by straightforward national security considerations.” In contrast, she said that Chinese government intervention in its economy is about obtaining unfair economic advantage over foreign competitors.
Yellen lashed out at the flood of cheap Chinese clean energy products that are driving down global prices, which may stifle U.S. attempts to boost the industry domestically. She also blamed China's overcapacity for domestic employment issues. A week before her visit, she said during a visit to Suniva, a solar cell manufacturer in Norcross, Georgia: “[A] flood of solar imports at artificially low prices due to heavy foreign government subsidies made it too hard to compete. … Between 2016 and 2020, nearly 20 percent of solar manufacturing jobs were lost.”Brad Setzer, a former U.S. trade and Treasury official, believes that Yellen's warning about China's overcapacity may be the first step taken by the Biden administration to impose new tariffs or set up other trade barriers on Chinese electric vehicles, batteries and related products. If China continues its current course, more protectionist measures might be rolled out by the Treasury Department.
The measures mentioned above stem not only from Washington's cognitive errors and deviations from its “non-market economic policy” with regard to China but also from the need to gain popular support in the presidential election at home. Yellen's trip took place in an election year during which Democratic and Republican parties are seeking to take tough stances on China. Recently, Democratic senators have urged the administration to take further action against Chinese electric vehicles, and Republican Senator Marco Rubio introduced three bills aimed at impeding or preventing Chinese EVs from entering the U.S. market. The U.S. public believes that Washington will take a series of proactive measures, including responses to the surge of Chinese imports, continued implementation of the Uyghur Forced Labor Prevention Act in the automotive industry and the imposition of comprehensive or increased tariffs.The two parties also criticize China's ownership of TikTok, allege espionage activities against the United States, claim manipulation of economic policies and charge China with a failure to protect human rights. Obviously, these things diminish the impact of the Biden administration's pragmatic approach toward China and undermine the efforts of Chinese and U.S. leaders to alleviate the trust deficit. They risk eroding the goodwill demonstrated by the two sides in negotiations and the credibility of their promises.
