US-China relations: Treasury Secretary Janet Yellen hails ‘step forward’ but warns national security concerns remain

Yellen said her talks with senior economic officials aimed to “establish a desire and willingness” for further engagement.

He trip came less than a month after Secretary of State Antony Blinken’s visit to Beijing in June marked the resumption of senior-level official contact in efforts to fix the strained ties.

Growing international tensions and US-led efforts to contain the Chinese technology sector have increasingly driven international investors to diversify away from the country.

The US Federal Reserve is looking to raise interest rates to curb inflation just as Beijing is cutting its rates to prop up the economy, a move that may accelerate capital outflows from China and hamper its recovery.

Yellen, viewed as the most dovish official in US President Joe Biden’s cabinet, stressed that the US was not seeking to decouple from China which would be “disastrous for both countries and destabilising for the world” and also “virtually impossible to undertake”.

“There is an important distinction between decoupling on one hand, and on the other hand, diversifying crucial supply chains or taking targeted national security actions,” she said.

“We believe the world is big enough for both of our countries to thrive.

“No one visit can solve our challenges overnight. But I hope the trip will help build a resilient and productive channel of communication with China’s new economic team.”

Yellen said she tried to address Chinese concerns that “de-risking” – the process of the US and other Western countries reducing their economic reliance on China – amounted to decoupling and said the two were “by no means the same thing”.

She added that even in the sectors where Washington was trying to de-risk, the US would continue to have trade and investment with China.

“A great deal of our economic interaction with respect to trade and investment is unproblematic, uncontroversial, brings benefits to us, brings benefits to China, and we want that to continue … Certainly I think that message was received.”

Without elaborating, she said some progress was made during her trip. A brief statement from Chinese state news agency Xinhua also implied deep rifts remained between the two sides.

“Abuses of national security would harm normal economic and trade interactions,” Xinhua said on Saturday after Yellen met He Lifeng, the vice-premier leading the Chinese side in trade discussions with the US.