Yellen’s visit to China aims to ease tensions amid deep divisions

WASHINGTON – The last time a US Treasury secretary visited China, Washington and Beijing were locked in a trade war, the Trump administration was preparing to label China a currency manipulator and deteriorating Relations between the two countries has shaken global markets. .

Four years later, while the Treasury Secretary, Janet Yellengears up to arrive in Beijing, many of the economic policy concerns that have soured between the United States and China remain — or have even intensified — despite the Biden administration’s less adversarial tone.


President Biden during a visit to a Taiwan Semiconductor Manufacturing Company plant under construction in Phoenix. The Biden administration’s efforts to help the US semiconductor industry have angered Chinese authorities. Photo TJ Kirkpatrick for the New York Times

The rates that the president Donald Trump remain in effect.

President Joe Biden worked to limit China’s access to critical technologies such as semiconductors.

and they are coming new restrictions to US investment in China.

Treasury Department officials have downplayed expectations of big progress on Yellen’s four-day trip, which begins with her arrival in Beijing on Thursday.

Instead, they suggest that his meetings with senior Chinese officials are aimed at improving communication between the world’s two largest economies.

But US-China tensions remain high and talks between Yellen and her counterparts are likely to be difficult.

On Monday he met in Washington with xie fengChinese ambassador, and the two officials held a “frank and productive conversation”, according to the Treasury.

These are some of the most controversial issues that have sown divisions between the United States and China.

Business technology and controls

Chinese officials remain bitter over the Biden administration’s decision in 2022 to place major restrictions on the types of advanced semiconductor and chip-making machinery that can be shipped to China.

These limitations have hampered China’s efforts to develop the artificial intelligencethe other types of advanced computing which should help strengthen each country’s economy and military in the future.

The Government of Hollandwhere semiconductor machinery maker ASML is located, it announced on Friday new restrictions machinery exports to China.

China imposed export restrictions on Monday germanium and galliumtwo metals used to make chips.

The Biden administration is considering new controls on advanced chips and US investment in Chinese cutting-edge technology.

Semiconductors have always been one of the most important and valuable categories of US exports to China, and while the Chinese government is investing heavily in its domestic capacity, it still lags the US by many years.

The Biden administration’s grant program to support the US semiconductor industry has also angered Chinese authorities, not least because it includes restrictions on investment in China.

Companies that accept money from the US government to build new chip facilities in the US cannot make new high-tech investments in China.

And while Chinese officials — and some American manufacturers — had hoped the Biden administration would raise tariffs on hundreds of billions of dollars of Chinese imports, it doesn’t appear that will happen.

Although Yellen questioned the effectiveness of the tariffs, other senior administration officials believe the levies are useful for buoying supply chains outside China.

The administration is using both carrots and sticks to push forward a policy of “de-risk” OR “friend’s support“, which is to draw the supply chains of crucial products such as batteries for electric vehicles, semiconductors and solar panels out of China.

Deterioration of the business environment

Companies doing business in China are increasingly concerned about attracting negative government attention.

The most recent target was Micron Technology, a US memory chip maker that failed a Chinese security review in May.

The move could prevent Micron from selling to Chinese companies operating key infrastructure, jeopardizing about one-eighth of the company’s global revenue.

Over the past few months, Chinese consulting and advisory firms with overseas ties have grappled strong measures.

US officials are increasingly concerned about the Chinese government’s use of economic coercion against similar countries Lithuania and Australiaand are working with European authorities and other governments to coordinate their responses.

Companies are also alarmed by China’s tightening of national security legislation, which includes a strict law on counterintelligence It went into effect on Saturday.

Foreign companies in China are reevaluating their businesses and the market information they collect because the law is vague about what is prohibited.

“We believe this is a very imprudent measure and we have made it known to various members of the government,” said R. Nicholas BurnsUS ambassador to China, in an interview in Beijing.

In the United States, China-related companies, such as social media app Tick ​​tockshopping app Temu and clothing retailer Shein face increasing scrutiny over their hiring practices, their use of US customer data, and how they import products into the US.

Evaluate

The Chinese currency, the renminbiit has often been a cause for concern for US authorities, who have sometimes accused Beijing of artificially weakening its currency to make it cheaper to sell its products abroad.

The recent weakness in the renminbi may be Yellen’s toughest problem.

The currency has it lost more than 7% against the dollar in the last 12 months and almost 13% against the euro.

This decline makes China’s exports more competitives in the United States.

China’s trade surplus in manufactured goods already accounts for a tenth of the entire economy’s output.

The renminbi isn’t the only one that has fallen against the dollar lately:

The Japanese yen plummeted for a variety of reasons, including rising interest rates in the US, while the Japanese yen Federal reserve try to stop the inflation.

Chinese economists have also blamed this factor on the weakness of the renminbi.

Zhan Yubo, an economist at the Shanghai Academy of Social Sciences, said the renminbi’s decline was a direct consequence of recent interest rate hikes by the Federal Reserve.

At the same time, China has cut interest rates to help its struggling economy.

The interest rate banks charge each other for overnight loans – a metric that tends to influence all other interest rates – is now just over 5% in New York and just 1% in Shanghai.

This reverses a long-standing pattern, where interest rates used to be higher in China.

Federal Reserve rate hikes have made it more attractive for businesses and households to send money out of China and invest it in the United States, defying Beijing’s strict limits on transferring money overseas.

China pledged three years ago, as part of a Phase 1 trade deal with the US, not to seek trade advantages by driving down the value of its currency.

But the Biden administration’s options may be limited if China lets its currency weaken anyway.

world debt

China has supplied more than 500,000 million dollars to developing countries through its loan program, making it one of the largest lenders in the world.

Many of these borrowers, including several African nations, have struggled financially since the pandemic and are facing the possibility of defaulting on their debt.

The United States, along with other Western nations, has lobbied China to allow some of these countries restructure your debt and reduce the amount owed.

But for more than two years, China has insisted that other multilateral lenders and lenders absorb financial losses as part of any restructuring, bogging down the debt relief process and threatening to plunge millions further into poverty in developing countries. development.

In June, international creditors, including China, agreed to a debt relief plan with Zambia that would grant a grace period on interest payments and extend the maturity dates on its loans.

it will forgive any debt, giving global politicians like Yellen hope for similar debt restructuring in poorer countries.

The agreement did not require the World Bank or International Monetary Fund cancel any debt, offering global politicians like Yellen the hope of similar debt restructuring in poorer countries.

Human rights and national security issues

Tensions over national security and human rights have created an atmosphere of mutual distrust and spilled over into economic relations.

The flight of a Chinese surveillance balloon across the United States this year has deeply concerned the American public, and members of Congress have lobbied the administration to reveal more about what it knows about the balloon.

Biden’s recent statements qualifying the Chinese leader, Xi Jinping, as a “dictator” also angered the Chinese authorities and state media.

US authorities remain concerned about human rights abuses in China, such as the crackdown on the pro-democracy movement in Hong Kong and the detention of predominantly Muslim ethnic minorities in the Xinjiang region in the country’s northwest.

A senior official ofI Department of the TreasurySpeaking on condition of anonymity ahead of Yellen’s trip, she said the United States had no intention of shying away from its views on human rights during meetings in China.

Chinese authorities continue to protest the various sanctions the United States has issued against Chinese companies, organizations and individuals for threats to national security and human rights violations, including sanctions against Li Shangfu, Chinese defense minister.

The Chinese government has cited these sanctions as the reason for its rejection of high-level military talks.

c.2023 The New York Times Society

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