Four days of high-level economic meetings between the United States and China ended Monday in Beijing without any major breakthroughs. However, the world's two largest economies agreed to hold further talks to address rising tensions over trade, investment and national security.
But the conversation is likely to become even more difficult as hopes for greater economic cooperation collide with a harsh political reality: It's an election year in the United States and antipathy toward China is high. At the same time, Chinese officials were unimpressed by Treasury Secretary Janet L. Yellen's demand that China scale back its recent surge in green energy technology exports, which could threaten American jobs.
Despite a warm welcome on her second trip to China as finance minister, which included meetings with the prime minister and senior economic and financial officials, it was clear that trust between the two sides is not very high.
“There is still a lot of work to be done,” Ms. Yellen said at a news conference in Beijing on Monday. “And it remains unclear how this relationship will endure in the coming months and years.”
Ms. Yellen also met with Pan Gongsheng, governor of the People's Bank of China, on Monday. She had previously held talks with her most important counterpart, Vice Premier He Lifeng, in the southern city of Guangzhou. The two sides agreed to hold further talks, including on promoting “balanced growth,” a reference to the export surge from China that some officials say is distorting global markets.
Several thorny issues will test the new lines of communication that the United States and China have been working to develop.
The most pressing question likely to divide them in the coming months is how the Biden administration plans to respond to concerns that Chinese exports of electric vehicles, lithium-ion batteries and solar panels pose a threat to the very industries in which the United States is investing trillions of dollars in domestic development.
In her meetings with her Chinese counterparts, Ms. Yellen tried to argue that China should focus more on investing in domestic consumption, warning that flooding markets with exports would disrupt supply chains. Europe, Mexico and Brazil are all conducting anti-dumping investigations into China that could lead to new trade restrictions, and Ms. Yellen suggested the United States was ready to protect its emerging industries.
China has denied illegally subsidizing its new energy exports and raised concerns about what its officials perceive as a wave of unfair protectionism. During a meeting on Sunday between Ms. Yellen and Prime Minister Li Qiang in Beijing, Mr. Li dismissed the issue of Chinese exports. He said the issue needed to be looked at objectively and from a “market perspective”, citing China's position that the rise in exports was driven by global demand.
“China hopes that the US side will work with the Chinese side to adhere to the basic norms of the market economy of fair competition and open cooperation, and not to politicize and nationally securitize economic and trade issues,” Mr. Li was quoted as saying in an official Summary of the meeting published by the Chinese government. (However, economists and foreign trade officials argue that China's industrial policies — including low-interest loans from state banks to factories and low-cost land transfers — are helping the country's exports.)
The prospect of additional American tariffs comes as China seeks to roll back some of the tariffs that Washington imposed on Chinese imports during the Trump administration.
Treasury officials said they made no tariff threats in their meetings in China, but noted that several other countries had launched anti-dumping investigations in response to the flood of cheap Chinese green energy exports.
“There is little prospect of a significant de-escalation of tariffs and other trade restrictions imposed by Washington, but avoiding a further escalation of open bilateral trade hostilities in the coming months would in itself be an achievement for both sides,” Eswar Prasad said. a former head of the International Monetary Fund's China Department.
A senior Treasury Department official, who spoke to reporters on condition of anonymity as is standard practice at such government briefings, said Chinese officials had expressed concerns about U.S. national security measures against China. The Biden administration has focused on preventing China from gaining access to information about American consumers. limiting China's access to technologies such as semiconductors that could advance its military; and the Inflation Reduction Act of 2022 prevents electric vehicles with Chinese components from being eligible for U.S. subsidies.
In Washington, Congress is working on a law aimed at forcing the Chinese company ByteDance to sell the social media platform TikTok under threat of an American ban. Chinese officials raised the issue during talks with Ms. Yellen, the Treasury official said. The Biden administration considers TikTok a national security risk, and President Biden has indicated that he will sign the TikTok Act bill if it passes.
On Monday, Ms. Yellen called national security talks with China “difficult” and suggested that the United States would work to make its plans and intentions clear.
“While the United States must continually assess its national security measures given the rapid pace of technological development, we are committed to avoiding surprises,” Ms. Yellen said.
The Biden administration is facing calls from Democratic and Republican lawmakers at the state and local levels for measures aimed at decoupling the two economies through investment restrictions and new tariffs on Chinese imports. At the same time, Beijing has sought assurances from Washington that it does not seek decoupling from China.
Ms. Yellen stressed on Monday that while the United States wants to protect national security, it is not seeking to disrupt trade and investment between the two countries.
“Our two economies are deeply integrated and complete separation would be disastrous for both our economies,” she said.
Siyi Zhao contributed reporting from Seoul.
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