When Treasury Secretary Janet L. Yellen traveled to Beijing last summer, her mission was to re-establish a dialogue between the world’s largest economies and stabilize a relationship that seemed to have hit rock bottom.
The United States and China have created formal economic working groups to maintain dialogue. A few months later, Ms. Yellen to her Chinese counterparts in San Francisco and Morocco. And the Treasury secretary’s consumption of a dish made of psychedelic “magic” mushrooms at a Yunnan-style restaurant in Beijing sparked a culinary frenzy in China, where Ms. Yellen for being a recognized economist.
But despite those signs of progress, thorny economic issues continue to divide China and the United States. When Ms. Yellen on Thursday for four days of meetings in Guangzhou and Beijing, 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 frustration about increasing barriers to Chinese investment in the United States.
“We don’t want to isolate our economies,” said Ms. Yellen on Wednesday during a stop in Alaska en route to China. “We want to continue, and we think we both benefit from trade and investment, but it has to be on a level playing field.”
But he suggested the administration was willing to take new trade actions against China to ensure the safety of the clean energy sector the United States is trying to boost through tax subsidies and other investments.
Here are some of the most contentious issues that have sown divisions between the United States and China.
A flood of clean energy exports
A top priority for Ms. Yellen was to convey the deep concern of the Biden administration that excessive subsidies of green technology exports from China are damaging global markets.
Ms. Yellen, during a visit to a solar cell plant in Georgia last week, said the rise of Chinese exports of electric vehicles, batteries and solar technology is problematic at a time when the United States is spending huge sums to try to develop those industries. He argued that China was following the same playbook it used when it flooded global markets with cheap state-subsidized steel and aluminum, hurting American producers who couldn’t compete.
On Wednesday, Ms. Yellen said the United States could act to ensure that money spent as part of the Inflation Reduction Act is not reduced by China’s practices.
“We are providing tax subsidies to some of these sectors, and I don’t want to rule out other possible ways in which we can protect them,” he said when asked about the potential for new tariffs on Chinese imports.
China is focusing on factory production to power its emerging economy. Its exports, measured in dollars, rose 7 percent in January and February compared with a year earlier. The increase in exports has also angered officials in the European Union, and the bloc announced last month that it was preparing to charge tariffs, which are import taxes, on all electric cars that arrive from China.
China has pushed back on claims that its economy is struggling and heavily dependent on exports. But it has set an ambitious economic growth target of “around 5 percent” for this year, and reaching it will depend in large part on strong demand for goods made by Chinese factories. – electric vehicles, solar panels and consumer electronics.
American tariffs
The Biden administration maintains tariffs on more than $300 billion of Chinese goods. Those taxes, first imposed by the Trump administration, remain a significant source of tension between the two countries.
Ms. Yellen came into office saying the tariffs were taxes on consumers and argued that Trump’s tariffs were poorly designed. However, rolling back the tariffs is particularly difficult in an election year, and Ms. Yellen is unlikely to be able to offer China much relief on that front.
The White House is weighing the possibility of relaxing some of the tariffs that have hit US consumers and imposing new ones that would target China’s green energy exports.
And another round of US solar tariffs could be coming this summer when the two-year pause President Biden issued in 2022 expires.
China has its own grievances about American trade policies and filed a complaint last week with the World Trade Organization arguing that the Biden administration’s electric vehicle subsidy policies are discriminatory.
Cross-border investment
The United States and China both say they welcome foreign investment, but their policies remain hostile.
American companies operating in China complained last year about their offices being searched and facing harassment from Chinese authorities. Ms. Yellen, who will meet with American business executives in Guangzhou, is seeking clarity on the scope of China’s anti-espionage law that foreign companies believe will lead to further government scrutiny.
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 made foreign businesses feel that the country is an especially bad place to work. Furthermore, concerns about China’s economy have left many companies less willing to tolerate the trade-offs of operating a business in the country.
Last month, Premier Li Qiang, China’s second-in-command, said the government was lifting restrictions on foreign investment to make the country a “favored destination” for overseas funds.
And Xi Jinping, China’s leader, met with a delegation of visiting US business leaders last week and declared that China remained committed to economic reform.
However, in a sign of mixed messages from Beijing, on the same day of Mr. Xi, China’s state security ministry warned the public about the intelligence risk posed by foreign consultancies — the kind of advisory firms that overseas companies rely on to perform. due diligence for investments.
The United States is also taking a tough approach. In a call this week, Mr. Biden and Mr. Xi is the fate of TikTok, the social media platform owned by the Chinese company ByteDance. The House of Representatives passed legislation last month that would have forced the sale of the company over national security concerns, and Mr. Biden has said he supports the bill, which still must pass 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, including banning new American investment in key technology industries that could be used to enhance Beijing’s military capabilities. It also limited China’s ability to benefit from the Inflation Reduction Act, the US climate and energy law.
Penalties
As secretary of the Treasury, Ms. Yellen the United States sanctions program, which in recent months has been increasingly directed at China.
In late March, the United States and Britain imposed sanctions on China’s elite hacking units, accusing Beijing’s top spy agency of a yearlong effort to plant malware on electrical grids, defense systems and other America’s critical infrastructure, and the theft of the voting roll to the tune of 40 million. British citizen.
Ms. Yellen has been vocal in urging China not to help Russia evade US sanctions. In a speech last year, he expressed dismay at China’s “no limits” partnership with Russia and called it “essential” that China not provide Russia with material support or aid in avoiding sanctions.
The Treasury Department is also increasingly targeting Hong Kong-based companies accused of helping Russia and Iran evade American sanctions.
Technology restrictions
The United States has imposed broad restrictions on the sale of advanced computing chips, chip-making equipment and related products to China, saying Beijing has used these goods to develop advanced weapons and surveillance system that conflicts with US national security interests.
China continues to work around those restrictions. After the White House changed rules for the export of 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 tightening of controls as part of a US strategy to hinder the country’s rise by limiting access to products critical to the advancement of AI and other next-generation technologies.
Daisuke Wakabayashi contributed reporting from Seoul.
