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US Treasury Secretary Yellen emphasizes impossibility of decoupling China, US economies

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US Treasury Secretary Janet Yellen asserted that any attempt to decouple the economies of the United States and China would be “virtually impossible” and would lead to destabilization in global markets.

Yellen’s four-day trip marks her first visit to China as Treasury chief and follows the recent visit of Secretary of State Antony Blinken.

The United States has been actively pursuing measures to reduce its exposure to China, citing concerns over national security. This includes restricting China’s access to advanced technologies crucial to Washington’s interests. The US has blacklisted several Chinese companies from accessing cutting-edge chips and has been urging its allies to follow suit.

However, Yellen clarified that the intention was not to completely separate the two economies, stating, “We seek to diversify, not to decouple. A decoupling of the world’s two largest economies would be destabilizing for the global economy.” She emphasized the complexity and near-impossibility of such a move during a meeting with representatives of US businesses organized by the American Chamber of Commerce in Beijing.

Ahead of Yellen’s visit, Beijing unveiled new export controls on metals essential for semiconductor manufacturing, citing national security grounds. Yellen expressed concerns regarding these measures and highlighted the need for resilient and diversified supply chains.

The Chinese government has adopted an optimistic stance on the visit, with the Ministry of Finance stating that it would strengthen communication and exchange between the two countries. An official from the ministry emphasized the mutually beneficial nature of China-US economic and trade relations, stating that there are no winners in a trade war or in the process of decoupling.

During her visit, Yellen engaged in substantive discussions with former Vice Premier Liu He and outgoing governor of China’s central bank, Yi Gang, on global and respective economic outlooks for both countries. She is also scheduled to meet Premier Li Qiang to discuss the economic relationship, address concerns, and explore opportunities for collaboration.

Observers view Yellen as a pragmatic member of the Biden administration, and her visit is seen as an opportunity to foster better understanding between the two nations. Both sides are expected to engage in frank and productive conversations, laying the groundwork for future dialogue.

While no major policy breakthroughs are expected during this visit, the United States aims to avoid miscommunication or misunderstanding and looks forward to constructive dialogue. Efforts to stabilize the bilateral relationship were initiated during Secretary Blinken’s visit to China in June. However, Yellen faces the challenge of convincing Beijing officials that US actions are motivated by national security concerns rather than an intention to hinder China’s economic progress.

Amid these discussions, reports have surfaced suggesting that the US administration is contemplating restrictions on Chinese firms’ access to American cloud computing services provided by companies like Amazon and Microsoft, further complicating the bilateral economic landscape.

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