Yellen Calls for ‘Constructive’ China Relationship

WASHINGTON — Treasury Secretary Janet L. Yellen on Thursday called for a “constructive” and “healthy” economic relationship between the United States and China, one in which the two nations could work together to confront global challenges in spite of their conflicting national security interests.

Ms. Yellen’s comments, which she delivered at Johns Hopkins University’s School of Advanced International Studies, were one of the most comprehensive articulations yet by a Biden official of the administration’s stance toward China. The speech struck a pragmatic but notably positive tone following months of heightened tensions between the nations, including over Chinese espionage and influence operations in the United States.

Ms. Yellen stressed the importance of securing American national security interests, as well as of protecting human rights. But she also argued that the United States was secure enough in its leadership of the global economy to welcome economic competition from China, as long as the country played by international rules.

“China’s economic growth need not be incompatible with U.S. economic leadership,” she said, adding, “We do not seek to ‘decouple’ our economy from China’s.”

She said that the Biden administration’s economic strategy is centered around investing in American infrastructure, clean energy and technology manufacturing, “not suppressing or containing any other economy.” And she urged China to work with the United States on challenges like helping indebted countries and mitigating climate change.

Scott Kennedy, a senior adviser at the Center for Strategic and International Studies, said the speech was “discordant with the general atmosphere in Washington and Beijing that the U.S. and China are destined to decouple and fight a war.”

Ms. Yellen articulated a positive rationale for having a commercial relationship with China in a way the Biden administration had not done before, Mr. Kennedy said. “By doing so, the administration has now clearly differentiated itself from the Trump administration in its approach to China.”

Ms. Yellen’s appeal for cooperation might have sounded unremarkable a decade ago, but attitudes in Washington toward China have become significantly more dour in recent years.

Republicans, as well as Democrats, now describe China as a dangerous economic rival and a security threat. Many have lost patience with the idea of bringing China into the rules-based international system, arguing that past efforts to do so failed to adequately improve the country’s practices.

Trump administration officials advocated a push toward “decoupling” the U.S. and Chinese economies, despite signing a trade deal with the country. The Biden administration has taken a more targeted approach, focused on preventing China from accessing technologies with military applications and lessening America’s dependence on China for critical products like solar panels and car batteries.

Relations have been particularly tense since February, when a Chinese spy balloon traversed the United States and caused a diplomatic blowup. Tensions also remain high over Taiwan, which China claims as its territory, and China’s close partnership with Russia.

A prospective visit to China earlier this year by Secretary of State Antony J. Blinken was canceled following the fracas over the spy balloon. Ms. Yellen said she planned to travel to China “at the appropriate time” to engage in a “substantive dialogue on economic issues.” Commerce Secretary Gina Raimondo is also exploring the possibility of a visit this year.

Jonathan Ward, the author of “The Decisive Decade,” about U.S. competition with China, said it was “time to move past wishful thinking” that China could be a responsible economic partner for the United States.

“U.S. and allied economic engagement with China is creating enormous, systemic risks for America,” he said, increasing dependency on China and facilitating the transfer of “technology and capital that enables its military buildup, surveillance state and human rights abuses.”

But Ms. Yellen said on Thursday that she and President Biden did not see the U.S.-China relationship as a zero-sum contest “where one must fall for the other to rise.”

“We believe that the world is big enough for both of us,” she said.

Ms. Yellen also said that the United States was not trying to damage China’s economy, and that targeted actions the United States has taken against China — like cutting it off from some of the world’s most advanced semiconductors — were aimed purely at protecting U.S. national security.

She added that the Biden administration was considering further restrictions on China, including a program to restrict certain U.S. investments in the country in technologies that could be used for surveillance or warfare. And she warned China not to provide material support for Russia’s war in Ukraine, saying that the consequences of violating U.S. sanctions on Russia “will be severe.”

The Biden administration has clamped down on doing business with China for certain advanced technologies, even as it aggressively subsidizes new manufacturing of semiconductors, clean cars and solar panels in the United States to build up alternative industries to China. Beijing has criticized the U.S. restrictions, saying that they are unlawful and a blatant effort to weaken the Chinese economy.

“These national security actions are not designed for us to gain a competitive economic advantage, or stifle China’s economic and technological modernization,” Ms. Yellen said.

A spokesman for the Chinese Embassy, Liu Pengyu, said China supported a healthy and mutually beneficial relationship with the United States. He added that “China does not shy away or flinch from competition” but opposes a broadening of national security concerns in trade and any potential threats to global supply chains.

Ling Chen, an assistant professor in political economy at the School of Advanced International Studies, said that a “key challenge” with this approach would be separating areas of economic development that pose a national security threat from those that don’t. She noted that China manufactures more basic computer chips that are used in cars and toasters but also in tanks and weapons.

“The potential problem is we live in a world where security issues and economic issues are increasingly intertwined. It’s very hard to separate,” Ms. Chen said.

Still, she called Ms. Yellen’s focus on cooperation welcome. “Nobody wants a war,” she said.

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