When Treasury Secretary Janet L. Yellen visited Beijing last summer, her mission was to re-establish dialogue between the world’s largest economies and stabilize relations that seemed to have hit rock bottom. there were.
The United States and China have established a formal economic working group to continue dialogue. A few months later, Yellen met with her Chinese counterpart in San Francisco and Morocco. And the Treasury secretary’s psychedelic “magic” mushroom dish at a Yunnan restaurant in Beijing sparked something of a culinary boom in China, where Yellen is popular as a prominent economist. .
But despite these signs of progress, thorny economic issues continue to divide China and the United States. Yellen arrives on Thursday to begin four days of talks in Guangzhou and Beijing, where the two sides will discuss the state of the global economy, the Biden administration’s concerns about a wave of Chinese green energy technology exports, and Beijing’s growing discontent. We plan to exchange opinions. Barriers to Chinese investment in the United States.
“We don’t want to divide our economy,” Yellen said Wednesday while in Alaska on her way to China. “We want to continue and we think we can both benefit from trade and investment, but it needs to be a level playing field.”
But he signaled his administration was prepared to take new trade measures against China to ensure the survival of the clean energy sector that the United States seeks to grow through tax subsidies and other investments.
Here are some of the most contentious issues that have created a rift between the United States and China.
Clean energy exports rush
A top priority for Ms. Yellen will be to convey the Biden administration’s deep concerns that a glut of heavily subsidized green technology exports from China is distorting global markets.
Yellen visited a solar factory in Georgia last week and argued that China’s surge in exports of electric vehicles, batteries and solar technology is problematic at a time when the U.S. is pouring in so much money. Develop those industries. He argued that China is following the same strategy when it flooded global markets with cheap, state-subsidized steel and aluminum, hurting uncompetitive U.S. producers.
Yellen suggested Wednesday that the U.S. may take action to ensure Chinese practices do not undermine funds disbursed as part of anti-inflation legislation.
In response to a question about possible new tariffs on imports from China, he said: “We are providing tax subsidies to some of these sectors, but we are also providing tax subsidies to other sectors to protect these sectors. “We don’t want to rule out any possible options.”
China is focusing on factory production to strengthen its sputtering economy. Export value in dollar terms increased by 7% in January and February compared to last year. The surge in exports has also infuriated European Union officials, who announced last month that they were preparing to impose an import tax on all electric cars arriving from China.
China has pushed back against claims that its economy is sluggish and overly dependent on exports. But China has set an ambitious economic growth target of “about 5%” this year, and achieving that goal will mainly depend on products like electric cars, solar panels and household appliances made in Chinese factories. Depends on strong demand.
american tariffs
The Biden administration maintains tariffs on more than $300 billion of Chinese goods. These taxes, first imposed by the Trump administration, remain a significant source of tension between the two countries.
After taking office, Yellen argued that tariffs are a tax on consumers and that President Trump’s levies were not well designed. But lifting tariffs will be especially difficult in his election year, and it is unlikely that Ms. Yellen will be able to provide much relief to China in this regard.
The White House is considering the possibility of easing some of the tariffs that have hurt U.S. consumers and imposing new tariffs focused on China’s green energy exports.
And another round of U.S. solar tariffs could go into effect this summer, when a two-year moratorium issued by President Biden in 2022 expires.
China has its own dissatisfaction with U.S. trade policy, filing a complaint with the World Trade Organization last week calling the Biden administration’s electric vehicle subsidy policy discriminatory.
cross-border investment
Both the United States and China say they welcome foreign investment, but their policies remain hostile.
U.S. companies with a presence in China have complained over the last year that they face office raids and harassment from Chinese authorities. Yellen, who is scheduled to meet with U.S. business executives in Guangzhou, is seeking clarification on the scope of China’s anti-espionage laws, which foreign companies believe could lead to further government surveillance.
Chinese leaders are trying to change the perception that the country is no longer a healthy place for foreign investors to put their money. The Chinese government has reason to be concerned. Foreign direct investment in China fell to its lowest level in 30 years last year, as the government took a series of measures that left foreign companies feeling that the country had become an increasingly hostile place to do business. ing. In addition, concerns about China’s economy have made many companies less willing to accept the trade-offs of operating in China.
Premier Li Qiang, China’s second-in-command, said last month that the government was lifting restrictions on foreign investment to make China a “preferred destination” for foreign funds.
And last week, Chinese leader Xi Jinping met with a visiting delegation of American business leaders and declared that China remains committed to economic reform.
However, in a sign of mixed messages from Beijing, on the same day as the meeting with Mr. Xi, China’s Ministry of State Security announced that the The government warned the public about the information risks that could arise. Investment due diligence.
The United States is also taking a strong response. Biden and Xi discussed the fate of TikTok, the social media platform owned by Chinese company ByteDance, during a phone call this week. The House of Representatives passed a bill last month to force the sale of the company, citing national security concerns, and Biden has said he supports the bill, but the bill must pass the Senate. China is expected to block any forced sale of TikTok, and Chinese officials are expected to raise the issue with Yellen.
The Biden administration is also seeking to clamp down on financial flows to China, including banning new U.S. investment in key technology industries that could be used to strengthen China’s military. It also limits China’s ability to benefit from inflation control laws and U.S. climate and energy laws.
sanctions
As Treasury secretary, Yellen oversees the U.S. sanctions program, which has increasingly focused on China in recent months.
In late March, the U.S. and Britain imposed sanctions on China’s elite hacking squad, over years of efforts by Beijing’s top spy agency to plant malware on the U.S. power grid, defense systems and other critical infrastructure. , accused him of stealing the voting rolls of 40 million people. British citizen.
Yellen has been pressuring China not to help Russia evade U.S. sanctions. In a speech last year, he expressed regret for the “unfettered” partnership between China and Russia, saying it was “essential” that China not provide Russia with material support or help in circumventing sanctions. Ta.
The Treasury Department is also increasing its focus on Hong Kong-based companies accused of helping Russia and Iran evade U.S. sanctions.
Technology limitations
The United States has ordered advanced computing chips, chip manufacturing equipment, and related products to China because China is using these products to develop advanced weapons and surveillance systems that are contrary to U.S. national security interests. imposes extensive restrictions on the sale of
China continues to push back against these regulations. After the White House last week revised rules on exports of U.S. artificial intelligence chips and chip manufacturing equipment, China criticized the U.S. for arbitrarily changing the rules and creating further obstacles to trade. did.
China sees the tightening of regulations as part of a U.S. strategy to halt the country’s rise by restricting access to products essential to advances in AI and other next-generation technologies.
Daisuke Wakabayashi I contributed a report from Seoul.
