ZURICH (AP) — U.S. Treasury Secretary Janet Yellen met with her Chinese counterpart on Wednesday and vowed to make efforts to manage differences and “prevent competition from ever becoming a conflict” as the two nations seek to to thaw the relationships.
Yellen’s first face-to-face meeting with Vice Premier Liu He in Zurich is the highest-level contact between the two countries since their presidents agreed at their first face-to-face meeting last November to explore areas of potential cooperation.
Liu said he is willing to work together to find common ground between China and the United States. “No matter how circumstances change, we should always keep the dialogue and exchange going,” he said.
According to a US Treasury Department pick from their meeting, the two agreed that the US and China would work more closely together on issues related to financing the fight against climate change and work to “help developing countries in their clean energy transition.” The ad also reveals that Yellen plans to travel to China in the near future and welcome her counterparts to the US.
The gathering comes as the US and Chinese economies grapple with distinct but intertwined challenges related to trade, technology and more.
Yellen told Liu in an opening speech to reporters, “Although we have disagreements and will communicate them directly, we should not allow misunderstandings, especially those stemming from lack of communication, to unnecessarily deteriorate our bilateral economic and financial relationship.”
Liu said that China and the US need serious communication and coordination, Chinese broadcaster Phoenix TV reported. He said both sides must look at the bigger picture, try to resolve disputes properly and work together to maintain the stability of the relationship, the channel said in an online report.
Yellen said the two countries “have a responsibility to manage our differences and prevent competition from becoming anything like a conflict”.
Both economies have their challenges.
The Chinese economy is reopening after a resurgence of COVID-19 has killed tens of thousands and shut down countless businesses. The US is slowly recovering from 40 years of high inflation and is on track to meet its legal debt ceiling, leading to an expected political showdown between Democrats and Republicans in Congress. The debt issue is of great interest to Asia as China is the second largest holder of US debt.
There’s also the Russian invasion of Ukraine, which is hampering global economic growth – and has prompted the US and its allies to agree on an oil price cap on Russia in retaliation, putting China in a difficult position as Russia’s friend and economic ally .
And high interest rates around the world have increased the pressure on indebted nations that owe large sums to China.
“One wrong policy move or a reversal of the positive data and we could see the global economy slip into recession in 2023,” said Josh Lipsky, senior director of the Atlantic Council’s GeoEconomics Center. “Both countries have a common interest in avoiding this scenario.”
The World Bank reported last week that the global economy will come “dangerously close” to recession this year, led by weaker growth in all of the world’s leading economies — including the US and China. Low-income countries are expected to suffer from any superpower economic downturn, the report said.
“High on the list is debt restructuring,” Lipsky said of Wednesday’s talks. Several low-income countries are at risk of defaulting in 2023, and many of them owe large sums to China.
“Leaders have spent two years trying to reach an agreement and avoid a spate of defaults, but there has been little success and one reason is China’s hesitation. I expect Yellen to press Liu He at the meeting,” Lipsky said.
Liu presented an optimistic vision for the world’s second-largest economy in a speech at the World Economic Forum in Davos, Switzerland on Tuesday.
“If we work hard enough, we are confident that China’s growth will most likely return to its normal trend in 2023. The Chinese economy will see significant improvement,” he said.
Following her stay in Switzerland, Yellen will travel to Zambia, Senegal and South Africa this week in what will mark the first of a series of visits by Biden government officials to sub-Saharan Africa later in the year.
Zambia is renegotiating its nearly $6 billion debt with China, its largest creditor. During a closed meeting at the Africa Leaders Summit in Washington in December, Yellen and Zambian President Hakainde Hichilema discussed “the need to address debt sustainability and the need to complete a debt treatment for Zambia,” according to Yellen.
The Zurich talks are a follow-up to the November meeting between President Joe Biden and China’s Xi Jinping on the sidelines of the G20 summit in Bali, Indonesia. The two leaders agreed to authorize key senior officials to work on areas of potential collaboration, including tackling climate change and maintaining global financial, health and food stability. Beijing cut such ties with the US in protest at then-House Speaker Nancy Pelosi’s trip to Taiwan in August.
“We’re going to be energetic. But I’m not looking for conflict,” Biden said at the time.
US Secretary of State Antony Blinken will travel to China in early February.
Among the economic sticking points, the Biden administration blocked sales of advanced computer chips to China and is considering an investment ban on some Chinese tech companies, potentially undermining a key economic goal Xi has set for his country. Statements by the Democratic President that the US would defend Taiwan against a Chinese invasion have also fueled increased tensions.
And while the US Congress is divided on many issues, members of the House of Representatives agreed last week to keep scrutinizing Chinese investments.
New House Speaker Kevin McCarthy, R-Calif., has identified the Chinese Communist Party as one of two “long-term challenges” for the House of Representatives, along with the national debt.
“There is a bipartisan consensus that the era of confidence in Communist China is over,” McCarthy said from the House last week as the House voted 365 to 65 — with 146 Democrats lining up with Republicans — for the facility of the Committee of Representatives for China voted.
Last year, the US Commerce Department blacklisted dozens of Chinese high-tech companies, including makers of aviation equipment, chemicals and computer chips, from export controls, citing concerns about national security, US interests and human rights. This move prompted the Chinese to file a lawsuit with the World Trade Organization.
Yellen has criticized China’s trade practices and its ties with Russia, as the two countries have deepened economic ties since the war in Ukraine began last February. In a call with Liu in July, Yellen spoke “candidly” about the impact of Russia’s invasion of Ukraine on the global economy and “unfair, non-market-conforming” economic practices, according to a US summary of the call.