China-US relations: economic chiefs Liu He, Janet Yellen in virtual talks

·5-min read

China’s economic tsar Liu He held a virtual meeting with US Treasury Secretary Janet Yellen on Wednesday morning, days after Liu’s first conversation on trade issues with US trade representative Katherine Tai, in a sign observers said indicated the need for economic policy coordination between the world’s two largest economies.

Both sides agreed China-US economic relations were “very important”, and discussions included the macro economic situation, as well as bilateral and multilateral cooperation “in an attitude of equality and mutual respect”, according to a brief statement by state news agency Xinhua.

They also had “candid” exchanges on issues of concern and agreed to keep communicating, the statement said.

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US-China trade dialogue ‘shows continuity’ in Beijing’s approach to relations

The US Treasury Department said in a brief statement that Yellen had discussed US plans to “support a continued strong economic recovery and the importance of cooperation on areas that are in US interest”, while at the same time “frankly” talking about issues of concern.

Yellen noted that she looked forward to further discussions with Liu, the statement said.

Taoran Notes, a social media account affiliated with the state-run Economic Daily that is used by Beijing to manage expectations on China-US trade talks, said hours after the latest discussion that “communications between China and the US on economy and trade, which once went silent, have resumed”.

Taoran Notes added that trade and the economy were still “ballast stones” to develop China-US relations and the two talks “have revealed a same message: pragmatic solution matters most”.

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Liu’s two video talks come as the Biden administration is conducting an overall review of its China policy and while the US continues to criticise Beijing over human rights issues and rally support from its allies to contain China.

No details were given on the issues discussed, while observers said topics were likely to have covered a wide range of issues including economic coordination of the world’s largest two economies.

Chen Fengying, a senior researcher with the China Institute of Contemporary International Relations, said that compared to the previous technical meeting to review implementation of the phase one trade deal with Tai, the virtual conference with Yellen might signal both sides had started to move to some hard topics previously scheduled in the phase two negotiations. “Bilateral macroeconomic coordination will stand out in future talks,” she said.

“It will fit with their positions – Liu He had a long career in China’s top economic planning and also masterminded the 2021-2025 development plan, while Yellen is trying hard for the approval of US jobs and families support plans.”

‘Issues of concern’ in US-China talks leave phase-one trade deal up in the air

China’s financial watchdogs have called for tougher global oversight to stop big flows of hot money across borders in the aftermath of the coronavirus pandemic, and voiced concerns about asset bubbles caused by speculative capital.

To curb the recent rapid rise in the yuan, China’s central bank, the People’s Bank of China, on Monday announced it was raising the amount of money financial institutions must set aside as reserves for their foreign exchange deposits.

A Xinhua commentary on Wednesday warned against speculative trading on the yuan’s appreciation. It also said the US dollar, despite its recent weakness in the exchange rate, was likely to rebound once the US Federal Reserve shifted policy or the US economic recovery further consolidated.

It said the regulators had acted to crack down on manipulation aiming for a stronger yuan, while staying on high alert to the US policy spillover, and added that China’s policies to cement its status in the global supply chain would benefit a stable yuan exchange rate in the long run.

“Yuan assets are not the gambling chip, but the high reward for patience and wise investors,” it said.

Liu, who oversees China’s economy, innovation and state-owned enterprises reform, also said in May that tighter regulation on cryptocurrencies was needed to protect the financial system.

US plans to spare China from currency manipulator label

China would like to separate the economy from sensitive topics like human rights and national security, and pursue “benign competition” with a willingness to negotiate over labour standards and competitive neutrality, Chen said.

While leaving the issue of cryptocurrencies to a multinational framework – the G20 or the International Monetary Fund – Beijing was seeking to ease Washington worries over its promotion of a sovereign digital currency and show its willingness to discuss a global corporate minium tax to fight evasion, she added.

Chen said the talks with the US “would also be a chance to pressure the EU”, at a time when Beijing’s relations with Brussels were worsening over the human rights issue.

He Weiwen, a senior researcher with the Centre for China and Globalisation, said “such dialogues are generally positive” in helping to improve sentiment and resume bilateral negotiations.

But he warned that the Biden administration’s strategic and political attempts to contain China pose a major obstacle to improved bilateral relations.

“Economic talks won’t generate sustainable progress unless the issue is solved,” said He, a former commercial counsellor at Chinese consulate general in New York and San Francisco. “All must be based on the condition that the US is not trying to contain China, but rather cooperate.”

In addition, China was keen on further talks on the basis of multilateral rules, not American rules, he added.

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