https://www.businesstimes.com.sg/opinion-features/beyond-decoupling-and-de-risking-yellens-visit-puts-more-positive-spin-sino
Beyond decoupling and de-risking: Yellen’s visit puts a more positive spin on Sino-American ties
LEON HADAR
Published Wed, Jul 12, 2023 ·
IT HAS become a pattern of sorts in the management of American geo-economic policy, the notion that while its commerce secretaries and the US trade representatives (USTR) over the years fight aggressively to defend the nation’s economic interests, the treasury secretaries try to ensure that Washington’s trade and investment relationship with other economies remains stable and open.
To put it differently, from the perspective of the commerce secretaries and trade representatives, maintaining the US industrial base and protecting the interests of its businesses and workers are seen as the central goals.
But for treasury secretaries such as Robert Rubin and Lawrence Summers (under former president Bill Clinton) or Steven Munchin (under former president Donald Trump) it is the health of the global economy and the US position in it that matter most.
So it was not surprising that when it came to the trade relations between the US and China, and earlier on, between the US and Japan, secretaries Rubin, Summers and Munchin were regarded as the so-called “globalists” who were trying to settle bilateral disputes and promote new commercial agreements, while their colleagues at commerce and USTR were more likely the ones threatening economic sanctions and tariffs.
That pattern seems to be repeating itself under President Joe Biden, where treasury secretary Janet Yellen has emerged as a strong opponent of the rising calls inside and outside the administration for the so-called “de-coupling” of the Chinese and American economies.
Hence secretary Yellen plays the role of the “good cop” vis-a-vis Chinese officials, turning down the temperature on the economic relationship and reminding government officials in Washington and Beijing that the world’s two largest economies, that represent 40 per cent of global output, have common commercial interests, and that they still compete in a non-zero-sum game.
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Put another way and in political terms, the constituencies that commerce secretary Gina Raimondo and USTR Katherine Tai pay heed to are American companies and labour unions that complain about China’s unfair trade practices or its alleged theft of technological assets.
Secretary Yellen’s main constituency, like that of her predecessor, has been Wall Street. The latter is more concerned that geo-economic wars between the US and China would disrupt the financial markets and destabilise the global economy. It sees China as a major investor in US bonds and as a huge market for America’s financial services.
Treasury secretaries recognise the political pressure that their bosses face – in the case of President Biden, the need to respond to growing protectionist pressures at home at a time of an evolving consensus in support of reassessing and restructuring economic ties with China. Not to mention the perception that China has emerged as America’s leading geo-strategic adversary, a point made by US national security adviser Jake Sullivan in recent months.
But Secretary Yellen is in a position to accentuate the positives in the Sino-American relationship, to suggest that even with all the problems, the Sino-American cup still remains half-full; that the two economies sell and buy products from each other and finance each other’s businesses.
It is against this backdrop that one has to reassess Yellen’s latest visit to China, the first by a US Treasury Secretary in four years, where she met the leading Chinese economic policymakers under President Xi Jinping, including Premier Li Qiang; Vice-Premier He Lifeng; Finance Minister Liu Kun; and the head of the People’s Bank of China, Pan Gongsheng.
The visit was not meant to mark a major change in the Sino-American relationship that will continue to reflect the Biden administration’s emphasis on restricting China’s access to strategic American technology. It is also planning to place restrictions on US investment in China, at a time of growing tensions between the two nations over Taiwan and over Beijing’s support for Russia in its war with Ukraine.
During her visit, Yellen seemed to suggest that the Biden administration has not launched a geo-economic war on China and that the measures it adopted against China target only certain sectors and should not have any wide-ranging effects on the Chinese economy, nor for that matter, on the bilateral economic relationship untries.
“I explained that President Biden is examining potential controls on outbound investment in certain very narrow high technology areas,” Yellen said over the weekend on CBS News’ Face the Nation. She stressed that such restrictions “should not be something that will have a significant impact on the investment climate between our two countries”. In other words, outside the narrow focus on national security, the two economies have wide scope to interact.
It is doubtful that her arguments would change the perception in Beijing of an America that is trying to retard Chinese economic growth through sanctions and tariffs and is pressing multinational companies to shift their supply chains and millions of jobs to other countries, so as to prevent China from posing a threat to continuing American pre-eminence.
Secretary Yellen has clearly tried during her trip to introduce a new softer tone to the relationship, rejecting the notion that the US is seeking to decouple from the Chinese economy.
“There is an important distinction between decoupling, on one hand, and on the other hand, diversifying critical supply chains or taking targeted national security actions,” she said. Whether that is how they are going to see things in Beijing is another question.