Yellen criticises Chinese curbs against US firms

US Treasury Secretary Janet Yellen criticised Chinese curbs against US firms while on a diplomatic visit to Beijing to improve bilateral ties.

Washington and its allies will fight back against Beijing’s “unfair economic practices”, she said on Friday.

Ms Yellen also struck a conciliatory note, saying the US seeks to diversify rather than decouple from China.

Her visit follows that of Secretary of State Antony Blinken as the US and China resume talks amid tensions.

The four-day trip, where she is scheduled to meet Chinese Premier Li Qiang, is expected to achieve very little by the time she takes off from Beijing Capital airport on Sunday evening. But the visit is important for the simple fact that it’s happening at all.

Relations between Beijing and Washington have deteriorated swiftly in recent years because of the many things that divide them: human rights in Xinjiang and Hong Kong, territorial claims to Taiwan and the South China Sea, Beijing’s growing domination of a host of industries from graphite and silicon production to rare earths, lithium batteries and solar panels.

Ms Yellen said she was “particularly troubled” by China’s recent punitive measures. This includes a crackdown on US-headquartered consulting firms and export controls introduced just last week on critical minerals used to make computer chips. This follows US restrictions that prevent Chinese companies from accessing the most advanced chips, while pushing ally countries to follow suit.

Ms Yellen told a separate meeting with Chinese officials that US curbs on the export of advanced technology is driven by national security concerns, and was not an attempt to gain economic advantage.

That is unlikely to win over Beijing, which believes the US is intent on preventing it from reaching its full potential. Beijing also looks around at its neighbours and sees a web of US military alliances and military bases stretching from Australia to Seoul, all aimed at one thing – containing China.

Washington, on the other hand, believes China is blocking fair access to its markets for leading US companies.

But both sides also realise that none of this is likely to change soon – and that gone is the era when the US shepherded China’s entry in to the World Trade Organisation.

China’s finance ministry said the US should take “concrete action” to improve ties. “The nature of China-US economic and trade relations is mutually beneficial and win-win, and there is no winner in a trade war or ‘decoupling and breaking chains’,” a ministry official said in a statement on Friday.

Ms Yellen too has made clear that severing the deep economic ties that now entwine the US and Chinese economies would hurt everyone.

“A decoupling of the world’s two largest economies would be destabilising for the global economy… and it would be virtually impossible to undertake,” she said in a meeting with representatives of US businesses hosted by the American Chamber of Commerce in China.

Equally, a war between Beijing and Washington over Taiwan should be unthinkable. And Ms Yellen emphasised the need to manage the relationship.

“It is in the best interests of the United States and China to have direct clear lines of communication,” she said on Friday.

Communication is what has been missing from the US-China relationship for a long time – and it is what the two sides are now trying to re-establish.