The Sino-US thaw

Yellen visit moves the needle

US Treasury Secretary Janet Yellen last week wrapped up a four-day visit to China on a note of cautious goodwill signalling progress in relations following a summit between US President Joe Biden and Chinese President Xi Jinping in California in November last year. It is unclear whether Ms Yellen’s visit, which followed a phone chat between Messrs Xi and Biden the week before, will yield concrete policy actions immediately, though her down-to-earth style, enthusiasm for Chinese food, and dexterity with chopsticks earned her generous praise from the state-controlled media. But the timing of the visit, her second in nine months, is significant. The Biden administration is nearing the completion of a review of whether to renew duties imposed in 2018 by Donald Trump on Chinese imports worth billions of dollars. The US has also restricted China’s access to advanced semiconductor and other technology, saying it could be used for military purposes. At the same time, the slowing Chinese economy has prompted a rethink in Beijing. Late last month, US business leaders attending the annual China Development Forum met Mr Xi as part of the Chinese administration’s efforts to boost foreign investment.

In meetings with Chinese officials Ms Yellen bluntly highlighted the key unfair trade practices that exercise the US: China’s overcapacity in key industries, mainly electric vehicles and solar panels. The US’ unwillingness to accept under-priced Chinese goods was the leitmotif of meetings with Vice-Premier He Lifeng in Guangzhou. Importantly, given the complexity and divergent views of the issues involved, the two countries agreed to hold more frequent exchanges on more balanced economic growth. One immediate outcome is an agreement to start exchanges to combat money laundering, though the date and venue are yet to be fixed. The optics of Ms Yellen’s China visit marked a shift in tone in US-China relations after the tensions caused by former House Speaker Nancy Pelosi’s visit to Taiwan in 2022, and the shooting down by American jets of a Chinese balloon that traversed US territory in early 2023. But, as Ms Yellen admitted, it would take many more months to reach agreement on all issues. For instance, the issue of overcapacity is unlikely to be resolved soon.

Reflecting the Chinese position, Premier Li Qiang was quoted in the Chinese daily Xinhua as saying the development of the green energy industry in China would play a key role in combating climate change. He urged Ms Yellen not to politicise the issue but ensure instead that the US follow basic market-economy norms of fair competition. Equally, Ms Yellen’s expressions of disapproval of China’s role in supporting military procurement for Russia in its war against Ukraine appear to have fallen on stony ground. The end of Ms Yellen’s visit coincided with a visit by Russia’s foreign minister to discuss strengthening strategic cooperation. The perceptible thaw demands close attention from India, whose relations with the US appear to have hit a rough patch. In January this year, India had to postpone plans to host the Quad summit, the centrepiece of this relationship. A new date for the summit is yet to be set. With impending elections in both nations, the state of play is unlikely to change anytime soon.