BEIJING: US Treasury Secretary Janet Yellen and Chinese Premier Li Qiang sounded a hopeful tone on US-China cooperation on Sunday, though the American policymaker noted both sides cannot shy away from tough conversations.

The US-China relationship can only move forward with direct and open communication, Yellen told Li after arriving in the Chinese capital from the southern city of Guangzhou.

“China sincerely hopes that the two countries will be partners, not adversaries,” Li said in welcoming remarks to Yellen.

He added that Chinese internet users have closely followed the details of her trip since her appearance in Guangzhou, showing “expectation and hope for the China-US relationship to continue to improve”.

US Treasury says both sides will start talks on tackling money laundering

Yellen had a series of meetings in the southern port city, including hours of discussions with her counterpart, Vice Premier He Lifeng.

Both countries have since agreed to hold talks on balanced growth under an existing working group, allowing officials to discuss the key US concern of “overcapacity”.

This refers to a situation where Chinese government support to industries fuels production capacity but risks a surge of exports at depressed prices to the global market, undercutting international competitors.

Washington is especially concerned about this phenomenon in new industries such as electric vehicles and solar energy, pushing for a “level playing field” for US firms and workers.

“While we have more to do, I believe that, over the past year, we have put our bilateral relationship on more stable footing,” she said in opening remarks to Premier Li as she began two days of high-level talks in Beijing.

Rather than avoiding hard conversations, this has meant “understanding that we can only make progress if we directly and openly communicate with one another”, the Treasury chief said.

A senior Treasury official told reporters Yellen had a “constructive conversation” with Li.

On overcapacity concerns, she raised issues from the perspective of a macroeconomist, seeking to understand the expected sources of demand in meeting Chinese growth targets, with sectors like property providing less growth than before, the official added.

Tensions remain

On Saturday, the Treasury also announced that United States and Chinese officials would start talks under another existing working group for cooperation on tackling money laundering.

The aim is to cut off financing for actors such as drug traffickers.

Washington has been seeking to work with Beijing to curb supply lines for the production of fentanyl, the synthetic painkiller behind a US overdose epidemic.

Despite the outcomes of meetings so far, China’s state-run Xinhua news agency warned in a commentary of the “spectre of protectionism” in the United States.

It criticised existing US tariffs on Chinese imports while accusing Washington of “suppressing” China’s electric vehicle-related industries, signalling tensions that remain.

‘Possibility for progress’

“Yellen’s visit has opened space to test the possibility for progress,” Brookings Institution senior fellow Ryan Hass told AFP.

He added that her trip has “illuminated that the Chinese recognise a need to engage on overcapacity and are prepared to explore cooperation on anti-money laundering”.

But only time can tell if these efforts bring material progress, he said.

In meetings with Vice Premier He, Yellen also warned companies in China not to provide support for Russia’s war in Ukraine — including to Moscow’s defence industrial base — cautioning of “significant consequences”.

Ahead of talks with Beijing mayor Yin Yong on Sunday, Yellen stressed the need to engage with local officials to understand China’s “economic future”.

“Local governments play a critical role, from boosting consumption to addressing overinvestment, and Beijing, of course, has particular importance,” she said.

A senior Treasury official told reporters Saturday that Washing­ton believes household spending needs to be a bigger part of China’s economy. On Monday, she is due to speak with former vice premier Liu He and central bank governor Pan Gongsheng.

Published in Dawn, April 8th, 2024