Yellen Says U.S. Doesn’t Seek ‘Winner Take All’ Fight With China

BEIJING—U.S. Treasury Secretary Janet Yellen pledged to Chinese Premier Li Qiang that the U.S. doesn’t seek economic estrangement from China, as she sought to curb a steep slide in relations between the world’s two biggest economies during a closely watched visit to Beijing. 

In China’s Great Hall of the People on Friday, Yellen defended the Biden administration’s position that the U.S. isn’t pursuing a “winner take all” fight with China, but rather wants to engage in economic competition that would benefit both countries over time. 

Yellen played down efforts by the U.S. to limit China’s access to sensitive technology—a particular irritant for Beijing, which has begun retaliating more forcefully—as narrowly targeted. She said such measures aren’t a reason to allow relations to deteriorate further. 

“The United States will, in certain circumstances, need to pursue targeted actions to protect its national security. And we may disagree in these instances,” she said, according to her prepared remarks. “However, we should not allow any disagreement to lead to misunderstandings that unnecessarily worsen our bilateral economic and financial relationship.”

Yellen’s conciliatory remarks to the Chinese premier followed her criticism earlier in the day over China’s treatment of U.S. companies. She told executives of U.S. businesses in China that she is especially troubled by recent punitive measures targeting American firms. 

Yellen is the latest senior U.S. official to fly to Beijing in a high-level bid to stabilize ties, following Secretary of State Antony Blinken’s visit in June. The Biden administration seeks to put a floor under the U.S.-China relationship to lower the risk of conflict, although Beijing has grown increasingly skeptical of Washington’s intentions. 

U.S. officials have played down any expectations of a breakthrough during the trip. Rather, it is part of a bid to re-establish regular in-person communication between the countries’ top officials, which was largely severed by China’s Covid-induced isolation during much of the past three years. 

In Beijing’s telling, the U.S. seeks to contain China’s rise through actions including the export controls on technology and efforts by the U.S. to deepen its partnership with allies that also oppose Beijing’s assertiveness in global affairs. China says Washington’s actions are to blame for the deterioration of ties, and has put the onus on the U.S. to take steps to improve them.  

Even so, a weakened Chinese economy only increases the importance to Beijing of seeking a stable relationship with the U.S. In some ways, the countries’ economies have sharply diverged as of late. While the U.S. works to tamp down inflation, China faces the inverse problem of anemic price growth. Beijing’s challenge is in part a result of a weaker-than-expected rebound since it lifted almost all pandemic-related restrictions. 

Some of the options that economists believe Beijing could employ to jump-start its economy include cutting interest rates, weakening its currency or offering cash or other stimulus to businesses or households. Such measures would ripple across markets and affect the U.S. outlook as well. Yellen, who formerly headed the U.S. Federal Reserve, is seeking a clear reading from Chinese officials on where their country’s economy is going. 

Besides meeting with Chinese Premier Li on Friday, Yellen also sat down with Chinese former Vice Premier Liu He. It wasn’t immediately known what he told Yellen about the Chinese economy.  

She was also due to have dinner with Zhou Xiaochuan, a former Chinese central-bank governor and one of the country’s best-known economic reformers, on Friday evening. 

The U.S. bid to limit China’s access to sensitive technology and retaliatory measures by China are expected to feature during Yellen’s trip. U.S. actions to limit Beijing’s access to advanced semiconductors—which Washington fears could bolster China’s military—are a rising point of contention. 

Ahead of Yellen’s arrival, China said it was establishing export controls on two minerals critical to the production of semiconductors. At a meeting with U.S. businesses in China on Friday, Yellen said the U.S. was still evaluating the recent Chinese actions, but that they serve as a reminder of why it is important to build diversified supply chains. 

She told the executives that she is telling Chinese leaders of their concerns, including China’s subsidies for state-owned enterprises and other domestic companies as well as market-access issues that have long challenged their operations in China. 

“I’ve been particularly troubled by punitive actions that have been taken against U.S. firms in recent months,” she said, according to her prepared remarks. 

Yellen didn’t name specific U.S. companies in her public remarks. In May, China said it was banning purchases by major Chinese companies from U.S. memory-chip maker Micron Technology. In recent months, Chinese authorities have also raided the offices of U.S. investigations firm Mintz Group and questioned staff at the consulting firm Bain & Co., as Beijing carries out a campaign targeting the collection of information seen as potentially sensitive.

Yellen also didn’t specifically mention China’s expanded national-security law in her public statement to China’s premier or to the executives. The law has broadened China’s definition of national security and tightened state control over a swath of data and digital activities, raising risks for U.S. companies in China and stoking anxiety among many executives who work in the country.

Write to Brian Spegele at [email protected]