At her confirmation hearing in early 2021, Treasury Secretary Janet L. Yellen struck a tough tone on China, describing it as America’s most important strategic competitor and pledging to confront its “egregious, unfair and illegal practices,” which she said hurt businesses and workers. . in the United States.
Since then, Mrs. Yellen has emerged as a voice of moderation in the Biden administration, embracing the mantle of economic pragmatism as the world economy deals with inflation and sluggish growth. The treasury secretary voiced objections to China’s human rights record, called for diversifying US supply chains and acknowledged that protecting national security is paramount.
But she has also been the administration’s most prominent proponent of maintaining economic ties with China, arguing against tariffs, urging caution about new restrictions on investment in China and, most recently, warning that decoupling the two economies would be “disastrous.”
Ms. Yellen, who arrived in Beijing on Thursday for a four-day visit, will navigate those conflicting interests in real time. The trip, her first as Treasury secretary, represents Ms. Yellen’s most difficult test of economic diplomacy yet as she tries to ease years of mistrust between the United States and China.
For Ms Yellen, the challenge will be to convince her Chinese colleagues that the slew of US measures blocking access to sensitive technology such as semiconductors in the name of national security are not intended to harm the Chinese economy. That won’t be easy, as both countries continue to erect new barriers to trade and investment.
The Biden administration is preparing several new restrictions on US technology trade with China, including possible limits on advanced chips and US investment in the country. Upcoming rules also appear to curb Chinese companies’ access to U.S. cloud computing services, according to people familiar with the matter, to close a loophole in earlier restrictions on China’s access to advanced chips used for artificial intelligence.
This week, Beijing hit back at the Biden administration’s restrictions on semiconductors, announcing that it would limit the export of some critical minerals used in the production of some chips.
On Monday, ahead of her trip, Ms. Yellen met in Washington with Xie Feng, China’s ambassador to the United States, and laid out “issues of concern” in what the Treasury Department described as a frank conversation. According to a summary of the conversation released by the Chinese embassy, Mr Xie explained China’s objections to US trade practices and urged the US to take steps to resolve them.
In her meetings in Beijing, Ms. Yellen is expected to demonstrate that the actions of the Biden administration to reduce the American economy from China and attract more production of critical materials within the United States are narrowly focused measures that do not aim. to instigate a wider economic war. China continues to hold nearly $1 trillion in U.S. debt and is America’s third-largest trading partner, making a sudden severance of ties potentially catastrophic for both countries and the global economy.
“I think she will go as the sober voice of reason to say that this is not about restraint,” said Tim Adams, the president of the Institute of International Finance and former Treasury undersecretary for international affairs. “It’s really about setting the tone for cooperation and showing that the United States remains interested in engaging in trade and investment with China.”
Over the past several decades, the Treasury has consistently been the US government agency that has tried most to maintain friendly relations with China. Wall Street firms, a key constituency for the department, tried throughout the 1990s to gain access to the Chinese market through China’s negotiations to join the World Trade Organization. After China joined the WTO in 2002, Wall Street firms and the Treasury Department pushed for China to move faster in actually opening its markets.
Beijing finally agreed in November 2017 to allow foreign investors to hold much larger stakes in insurance, banking and securities businesses, as part of a series of concessions made in a failed attempt to avert a trade war with the Trump administration.
While it is her first trip to Beijing as Treasury Secretary, Ms. Yellen is no stranger to China. In her role as president of the Federal Reserve Bank of San Francisco, she had regular contact with Chinese officials, and as president of the Federal Reserve from 2014 to 2018 she would meet with officials from China’s central bank at international meetings.
Ms. Yellen’s credentials as an academic economist made her a welcome envoy in Beijing.
“They really like her because she looks at the world in economic terms, and they’re very comfortable with that,” said Craig Allen, the president of the US-China Business Council.
Michael Pillsbury, senior fellow for China strategy at the Heritage Foundation, said Chinese officials view Ms. Yellen as a voice of reason and that they hope she can make the case to others in the Biden administration that America should. back away from new investment restrictions and pick up rates.
“They want Janet to help,” said Mr. Pillsbury, who was a top adviser on China in the Trump administration. “They see her as a friend of China.”
Ms. Yellen does not direct trade policy, but she has criticized the tariffs that President Donald J. Trump has imposed on more than $300 billion of Chinese imports.
“Tariffs are taxes on consumers,” Ms. Yellen told The New York Times in 2021. “In some cases it seems to me what we’ve hurt American consumers, and the kind of deal that the previous administration negotiated really didn’t address in. in many ways the fundamental problems we have with China.”
Those rates remain under review by the Office of the U.S. Trade Representative, and Ms. Yellen has acknowledged that they are unlikely to be raised anytime soon.
Ms Yellen’s ability to forge deeper ties with Beijing could be hampered by the current political moment.
Concerns about China grew after a spy balloon flew over the United States before being shot down over the Atlantic Ocean. The upcoming presidential election is also likely to intensify anti-China rhetoric, as candidates seek to portray themselves as tough on China, often a winning campaign message. And Republicans have voiced criticism of greater US outreach to China.
Ms. Yellen’s visit follows a trip last month by Antony J. Blinken, the secretary of state. John F. Kerry, the special climate envoy, is expected to travel to Beijing soon.
Representative Mike Gallagher, a Wisconsin Republican who chairs the House Select Committee on the Chinese Communist Party, has accused the Biden administration of slow-moving export restrictions targeting Huawei, the Chinese telecommunications giant, and sanctions against Chinese officials responsible for human rights abuses against Uighurs in Xinjiang. . He argued that China’s behavior worsened as the Biden administration dealt with a “zombie engagement” with the Chinese Communist Party.
“After Secretary Blinken left Beijing with little to show for his trip, doubling down on sending additional Cabinet officials like Secretary Yellen would only continue this vicious cycle,” Mr. Gallagher said.
With Republican presidential candidates like Nikki Haley warning that China is “preparing for war” with the United States, there is added urgency for Ms. Yellen to find ways to keep the lines of communication with her Chinese counterparts open even if her trip does not relent. some important successes.
“The Chinese are very aware of the American election cycle, and in my mind this is partly why they wanted to be a little more open,” said Eswar Prasad, former head of the China division of the International Monetary Fund. “Both Secretary Yellen and the Chinese would like to return to a place where they see at least parts of the economic relationship as a positive-sum game, rather than a zero-sum game.”
Keith Bradsher contributed reporting.