US Treasury Secretary Janet Yellen has arrived in China in hopes of resetting a relationship that has deteriorated over the years, especially following tensions over the conflict in Ukraine, alleged Chinese spy balloons flying into US airspace, and trade restrictions by both sides.

Speaking at a press conference at the end of a high-level visit to China on July 9, Ms. Yellen said that her talks with Chinese leaders marked a step forward in efforts to stabilize relations between the world's two largest economies, despite significant disagreements between the two sides.

“We believe the world is big enough for both of our countries to thrive,” Ms. Yellen said.

Top Goals

During her first visit to China as US Treasury Secretary, Ms. Yellen met with Premier Li Qiang, Vice Premier He Lifeng, Finance Minister Liu Kun and Party Secretary of the People's Bank of China (PBOC) Pan Gongsheng.

Apart from Mr. Phan Cong Thang, who was recently appointed, the remaining three leaders all took office late last year, after President Xi Jinping was re-elected for a third term.

In fact, expanding communication with China’s new leadership team was a top priority for Ms. Yellen and her delegation, so the 10-hour talks with four of Xi’s top economic policymakers, especially He Lifeng, were arguably their biggest achievement.

While the US administration has held several rounds of high-level diplomatic talks with China, these are the first such economic talks under the new administration.

“The outcome of the meeting is the meeting itself, not the specific issues,” said Scott Kennedy, a China economist at the Center for Strategic and International Studies in Washington. “We’re starting at a point where we’ve barely spoken to each other in three and a half years and the level of suspicion and skepticism has built up so high.”

It is important that Yellen, He and other Chinese officials can have substantive discussions about policy differences after years of disagreement over the Covid-19 pandemic, tariffs, national security, trade restrictions and growing difficulties for American companies in China, Kennedy said.

Ms. Yellen declared that the two sides would pursue more frequent communication at the highest levels, because improving dialogue is the way to prevent distrust and cracks in the relationship that she called "one of the most important relationships of this era".

Ms. Yellen's visit follows that of US Secretary of State Antony Blinken as part of an effort to "warm up" relations that have been frozen after the US military shot down a Chinese government spy balloon in the US sky.

Both visits also pave the way for a meeting between US President Joe Biden and President Xi Jinping, expected to take place at the G20 Summit in September in New Delhi or the Asia-Pacific Economic Cooperation (APEC) forum scheduled for November in San Francisco.

Significant disagreement

Although Ms. Yellen's visit is seen as a positive step in the relationship between the two superpowers, many experts in both China and the US warn against expecting many changes to follow.

Ms. Yellen returned to Washington on July 9 without any announcement of breakthroughs or agreements to heal the persistent rift between the two countries.

“Ms. Yellen’s trip will likely cool tensions in the economic relationship and remind both the US and China that they have some common trade interests, even if weakened, and they need to talk things through,” said Mark Sobel, a former US Treasury official.

However, given national security concerns in both countries as well as China’s perception that the US seeks to contain its economic development, “Ms. Yellen’s trip is unlikely to change the fundamental dynamics and trajectory of the economic relationship,” said Mr. Sobel.

Ms. Yellen and Chinese officials pointed to significant disagreements and talked about U.S. concerns about China’s “unfair economic practices,” as well as recent punitive actions against U.S. companies, including restrictions on key semiconductor metals.

Meanwhile, China also criticized President Joe Biden's consideration of an executive order to block billions of dollars in US investments in sensitive technologies such as quantum computing and artificial intelligence in China.

Those measures would be targeted at specific sectors and not intended to have a broad impact on the Chinese economy, Yellen said, and she pledged that any investment restrictions imposed by the Treasury would be narrowly targeted to areas where they had specific national security concerns.

The US administration also asserts that its recent restrictions on high-tech exports to China, especially cutting-edge semiconductors, are focused solely on US military security. It also describes its actions as building a high fence around a small technology park.

However, many in China remain skeptical. “When the US presents policies as ‘only for national security,’ the question is how broad is the scope of national security,” said Wu Xinbo, dean of the School of International Studies at Fudan University in Shanghai .

Nguyen Tuyet (According to NY Times, Reuters, The Guardian)