US Treasury Secretary Janet Yellen met with her Chinese counterpart on Wednesday and vowed an effort to manage differences and “prevent competition from becoming borderline conflict” as the two nations try to unfreeze ties. relations.
Yellen’s first face-to-face meeting with Vice Premier Liu He in Zurich marks the highest-ranking contact between the two countries since their presidents agreed last November during their first in-person meeting to explore areas of potential cooperation.
Liu said he was ready to work together to find common ground between China and the United States. “No matter how the circumstances change, we must always maintain dialogue and exchanges,” he said.
A US Treasury reading of their meeting says the two agreed the US and China would further cooperate on issues related to climate finance and work to support “developing countries in their transitions of clean energy”. The reading also indicates that Yellen plans to travel to China and welcomes her counterparts to the US in the near future.
Liu is expected to retire and be replaced as vice premier at the next session of the National People’s Congress this spring. It is not yet clear who will be Yellen’s main interlocutor in China in the future.
The meeting comes as the US and Chinese economies grapple with different but intertwined challenges in trade, technology and more.
Yellen, in her opening remarks in front of reporters, told Liu: “While we have areas of disagreement and will communicate them directly, we must not allow misunderstandings, particularly those resulting from miscommunication, to unnecessarily worsen our economic relationship. and social bilateral”. financial relationship.”
Liu said China and the United States need to communicate and coordinate seriously, Chinese broadcaster Phoenix TV reported. He said both sides should look at the big picture, try to handle disputes properly and work together to maintain stability in relations, the broadcaster said in an online report.
Yellen said the two countries “have a responsibility to manage our differences and prevent competition from becoming close to conflict.”
Both economies have their challenges.
The Chinese economy is reopening after a resurgence of COVID-19 killed tens of thousands of people and shuttered countless businesses. The United States is slowly recovering from the highest inflation in 40 years and is on track to hit its legal debt ceiling, sparking an expected political showdown between Democrats and Republicans in Congress. The debt issue is of great interest to Asia, as China is the second largest holder of US debt.
There’s also Russia’s invasion of Ukraine, which hampers global economic growth and has led the US and its allies to agree to a retaliatory oil price cap for Russia, putting China in a tough spot as a friend. and an economic ally of Russia.
And high interest rates globally have increased the pressure on debt-burdened nations that owe China vast sums.
“One wrong policy move or a reversal in positive data and we could see the global economy heading for a recession in 2023,” said Josh Lipsky, senior director of the Atlantic Council’s Center for Geoeconomics. “Both countries have a shared interest in avoiding that scenario.”
The World Bank reported last week that the world economy will be “dangerously close” to a recession this year, driven by weaker growth in all the world’s major economies, including the US and China. Low-income countries are expected to suffer from the economic downturns of the superpowers, according to the report.
“High on the list is debt restructuring,” Lipsky said of the talks on Wednesday. Several low-income countries are at risk of debt default in 2023 and many of them owe large sums to China.
“Leaders have been trying for two years to reach a deal and avoid a wave of defaults, but there has been little success, and one of the reasons is China’s vacillation. I hope Yellen will press Liu He on this at the meeting,” Lipsky said.
Liu laid out an optimistic view for the world’s second-largest economy in a speech Tuesday at the World Economic Forum in Davos, Switzerland.
“If we work hard enough, we are confident that by 2023, China’s growth will probably return to its normal trend. The Chinese economy will see significant improvement,” he said.
Following her stopover in Switzerland, Yellen will travel to Zambia, Senegal and South Africa this week in what will be the first in a series of visits by Biden administration officials to sub-Saharan Africa during the year.
Zambia is renegotiating its nearly $6 billion debt with China, its biggest creditor. During a closed-door meeting at the Africa Leaders Summit in Washington in December, Yellen and Zambian President Hakainde Hichilema discussed “the need to address debt sustainability and the imperative to conclude a debt treatment for Zambia,” according to Yellen.
The Zurich talks are a follow-up to the November meeting between US President Joe Biden and Chinese President Xi Jinping on the sidelines of the Group of 20 summit in Bali, Indonesia. The two world leaders agreed to empower key senior officials to work in areas of potential cooperation, including fighting climate change and maintaining global financial, health and food stability. Beijing cut off those contacts with the United States in protest of then-House Speaker Nancy Pelosi’s trip to Taiwan in August.
“We are going to compete vigorously. But I don’t look for conflict,” Biden said at the time.
US Secretary of State Antony Blinken will travel to China in early February.
Among the economic pain points, the Biden administration has blocked the sale of advanced computer chips to China and is considering banning investment in some Chinese technology companies, possibly undermining a key economic goal Xi set for his country. Statements by the Democratic president that the United States would defend Taiwan from a Chinese invasion have also heightened tensions.
And while the US Congress is divided on many issues, House members agreed last week to further scrutinize Chinese investments.
New House Speaker Kevin McCarthy, R-Calif., identified the Chinese Communist Party as one of two “long-term challenges” for the House, along with the national debt.
“There is a bipartisan consensus that the era of trusting Communist China is over,” McCarthy said from the House floor last week when the House voted 365 to 65 — with 146 Democrats joining Republicans — to establish the Committee. House Select on China.
Last year, the US Commerce Department added dozens of Chinese high-tech companies, including makers of aviation equipment, chemicals and computer chips, to an export controls blacklist, citing security concerns. national law, US interests, and human rights. That move prompted the Chinese to file a lawsuit with the World Trade Organization.
Yellen has been critical of China’s trade practices and its relationship with Russia, as the two countries have deepened their economic ties since the start of the war in Ukraine last February. In a July call with Liu, Yellen spoke “frankly” about the impact of Russia’s invasion of Ukraine on the global economy and “unfair, non-market” economic practices, according to a US summary of the call.