When Treasury Secretary Janet L. Yellen traveled to Beijing last summer, her mission was to restore dialogue between the world’s largest economies and stabilize a relationship that appeared to have reached its lowest point.
The United States and China have set up formal economic working groups to keep the conversation going. Months later, Ms. Yellen met with her Chinese counterparts in San Francisco and Morocco. And the finance minister’s consumption of a dish of psychedelic “magic mushrooms” at a Yunnan-style restaurant in Beijing sparked something of a culinary craze in China, where Ms. Yellen is known as a renowned economist.
Yet despite these signs of progress, thorny economic issues continue to divide China and the United States. When Ms. Yellen arrives in Guangzhou and Beijing on Thursday for four days of meetings, the two sides are expected to exchange views on the state of the global economy, the Biden administration’s concerns about China’s wave of green energy technology exports and Beijing’s increasing frustration with obstacles to Chinese investment in the United States.
“We don’t want to decouple our economies,” Ms. Yellen said Wednesday during a stop in Alaska en route to China. “We want to move forward and believe we both benefit from trade and investment, but there needs to be a level playing field.”
But she indicated that the administration was prepared to take new trade measures against China to ensure the survival of the clean energy sector, which the United States has sought to expand through tax subsidies and other investments.
Here are some of the most contentious issues that have caused divisions between the United States and China.
A flood of clean energy exports
Ms. Yellen’s top priority will be to express the Biden administration’s deep concern that a flood of heavily subsidized green technology exports from China is distorting global markets.
Ms. Yellen expressed concern during a visit to a solar cell factory in Georgia last week that a surge in Chinese exports of electric vehicles, batteries and solar technology was problematic at a time when the United States is spending huge sums to develop those industries. She claimed that China is following the same tactics as it used to flood global markets with cheap, government-subsidized steel and aluminum, hurting American manufacturers who cannot compete.
On Wednesday, Ms. Yellen suggested that the United States could take steps to ensure that money spent under the Inflation Reduction Act is not undermined by China’s practices.
“We provide tax subsidies to some of these sectors and I don’t want to rule out other ways to protect them,” she said when asked about the possibility of new tariffs on Chinese imports.
China has focused on factory production to boost its flagging economy. Its exports, measured in dollars, rose 7 percent in January and February compared with a year earlier. The surge in exports has also angered officials in the European Union, and the bloc announced last month that it was preparing to impose tariffs, or import taxes, on all electric cars coming from China.
China has rejected claims that its economy is struggling and overly reliant on exports. However, it has set an ambitious economic growth target of “around 5 percent” for this year, and achieving that target will depend in large part on strong demand for goods made in Chinese factories – electric vehicles, solar panels and consumer electronics.
American tariffs
The Biden administration has maintained tariffs on over $300 billion worth of Chinese products. These levies, first introduced by the Trump administration, remain a significant source of tension between the two countries.
Ms. Yellen said when she took office that the tariffs were consumer taxes and argued that the Trump levies were not well designed. However, rolling back tariffs is particularly difficult in an election year, and Ms. Yellen is unlikely to be able to offer China much relief in this regard.
The White House is considering the possibility of easing some of the tariffs hitting U.S. consumers and imposing new tariffs that would focus on China’s green energy exports.
And there could be another round of U.S. solar tariffs this summer when a two-year suspension President Biden issued in 2022 expires.
China has its own criticisms of U.S. trade policies, filing a complaint with the World Trade Organization last week alleging the Biden administration’s electric vehicle subsidy policies are discriminatory.
Cross-border investments
Both the United States and China say they welcome foreign investment, but their policies remain hostile.
American companies operating in China have complained over the past year that their offices have been raided and have been harassed by Chinese authorities. Ms. Yellen, who will meet American business leaders in Guangzhou, has sought clarity on the scope of a Chinese anti-espionage law that foreign firms believe will lead to increased government control.
China’s leaders are pushing to change the perception that the country is no longer a good place for foreign investors to put their money. Beijing has reason to worry: Foreign direct investment in China fell to its lowest level in three decades last year, and the government took a series of measures that left foreign companies feeling the country was an increasingly hostile place to do business. Additionally, concerns about China’s economy have made many companies less willing to accept the trade-offs of doing business in the country.
Last month, Prime Minister Li Qiang, China’s deputy, said the government would lift restrictions on foreign investment to make the country a “preferred destination” for foreign money.
And Xi Jinping, China’s leader, met last week with a delegation of visiting U.S. business leaders and said China remained committed to economic reforms.
However, in a sign of mixed messages from Beijing, on the same day as Mr. Xi’s meeting, China’s State Security Ministry warned the public about the intelligence risk posed by foreign consulting firms – the kind of consulting firms that foreign companies rely on to perform due diligence for investments .
The USA is also taking a tougher approach. During a phone call this week, Mr. Biden and Mr. Xi discussed the fate of TikTok, the social media platform owned by Chinese company ByteDance. The House of Representatives passed a bill last month that would force the company’s sale on national security grounds, and Mr. Biden has said he supports the bill, which still needs to be passed by the Senate to become law. China is expected to block a forced sale of TikTok, and Chinese officials are expected to raise the issue with Ms. Yellen.
The Biden administration is also trying to stem the flow of money to China by, among other things, banning new American investments in key technology industries that could be used to improve Beijing’s military capabilities. It has also limited China’s ability to benefit from the Inflation Reduction Act, the U.S. climate and energy law.
Sanctions
As Treasury secretary, Ms. Yellen oversees the United States’ sanctions program, which has increasingly targeted China in recent months.
In late March, the United States and Britain imposed sanctions on China’s elite hacking units, accusing Beijing’s top spy agency of years of trying to inject malware into America’s power grids, defense systems and other critical infrastructure and of stealing the voter rolls for 40 million British people Citizen.
Ms. Yellen has been vocal in pressuring China not to help Russia circumvent U.S. sanctions. During a speech last year, she expressed dismay at China’s “borderless” partnership with Russia, calling it “essential” that China does not provide Russia with material support or help in evading sanctions.
The Treasury Department has also increasingly focused on Hong Kong-based firms accused of helping Russia and Iran evade American sanctions.
Technology limitations
The United States has imposed broad restrictions on the sale of advanced computer chips, chip-making equipment and related products to China, saying Beijing has used those goods to develop advanced weapons and surveillance systems that are contrary to U.S. national security interests.
China continues to resist these restrictions. After the White House revised rules for exporting American artificial intelligence chips and chip-making equipment last week, China criticized the United States, saying it was arbitrarily changing the rules and creating more barriers to trade.
China sees the tightened controls as part of a U.S. strategy to thwart the country’s rise by restricting access to products critical to advancing AI and other next-generation technologies.
Daisuke Wakabayashi contributed reporting from Seoul.
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2024-04-03 22:22:05
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