US Treasury secretary Janet Yellen has warned any effort to decouple from China would be “disastrous”, saying national security measures targeted at Beijing were not designed to “stifle” the Chinese economy.
In a major speech on Thursday, Yellen called for a “constructive and fair” economic relationship between China and the US, as Washington seeks to repair badly fraying relations between the two economic powers.
“The US will assert ourselves when our vital interests are at stake,” the Treasury secretary said. “But we do not seek to ‘decouple’ our economy from China’s. A full separation of our economies would be disastrous for both countries. It would be destabilising for the rest of the world.”
Relations between the powers have reached their worst state in decades after efforts to ease tensions were derailed two months ago when a suspected Chinese spy balloon flew over the US.
Beijing maintains Washington is trying to contain its rise by limiting its ability to develop a high-end semiconductor industry. It also claims the US is helping Taiwan to resist its long-term plan to bring the island under control.
Chinese officials are privately frustrated that their US counterparts weave critical language into speeches ostensibly about improving relations.
But Yellen said both countries needed to be able to discuss “difficult issues” frankly.
“Negotiating the contours of engagement between great powers is difficult,” she added. “But we can find a way forward if China is also willing to play its part.”
But while the Treasury secretary called for a “healthy economic relationship” and co-operation on macroeconomics and climate change, she said the US would continue to work with allies to resist Beijing’s “unfair” economic policies.
She said China’s decision in recent years to pivot from market reforms to a more state-driven approach had “undercut its neighbours and countries across the world”.
“Even as our targeted actions may have economic impacts, they are motivated solely by our concerns about our security and values,” she added, maintaining that the US was not trying to undermine China. “Our goal is not to use these tools to gain competitive economic advantage.”
In a reference to steps such as the US’s semiconductor export controls, Yellen argued that safeguarding certain technologies from the Chinese military was of “vital” interest, but “not designed . . . to stifle China’s economic and technological modernisation”.
She also signalled the US was preparing more measures likely to anger Beijing. She said the administration was considering a programme to “restrict certain US outbound investment in specific sensitive technologies with significant national security implications”.
Tensions between the US and China have risen sharply, particularly over Taiwan, as Washington becomes more concerned about assertive Chinese military activity.
When Joe Biden and Xi Jinping met at the G20 in November, the two presidents agreed to try to set a “floor” under the relationship and discussed high-level exchanges that would start with Antony Blinken, secretary of state, visiting Beijing in February.
That plan was knocked off course when the spy balloon appeared over the US and Blinken abruptly cancelled the visit.
Beijing has resisted rescheduling over concerns that the FBI may soon release a report on the balloon. But in a rare positive sign, two senior commerce department officials, including China expert Elizabeth Economy, this month travelled to Beijing for talks about a possible visit later this year by Gina Raimondo, commerce secretary.
Despite her critical comments, Yellen said she planned to travel to China “at the appropriate time”.
She also called on China to work with Washington to help emerging market and developing countries facing debt problems. “China’s participation is essential to meaningful debt relief,” she said. “But for too long, it has not moved in a comprehensive and timely manner. It has served as a roadblock to necessary action.”
The Chinese embassy in Washington said economic co-operation was mutually beneficial and “should not be a zero-sum game”.
“China does not shy away or flinch from competition. However, we oppose defining the entire China-US relations by competition, oppose the generalisation of the concept of national security, oppose decoupling even at the expense of global industrial and supply chains,” said Liu Pengyu, the embassy spokesperson.
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