Yellen speaks out against economic 'decoupling'

The United States Treasury Secretary Janet Yellen delivered a speech on Thursday that appeared to update the US-China relationship, opposing economic "decoupling" but also maintaining an aggressive approach on various issues.

Yellen's speech at Johns Hopkins University's School of Advanced International Studies in Washington DC followed months of acrimony between the two nations over issues such as Taiwan, the Ukraine conflict and a stray balloon over US skies.

"The US will assert ourselves when our vital interests are at stake," Yellen 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 destabilizing for the rest of the world."

Yellen said that she and US President Joe Biden do not see the bilateral relationship as a zero-sum contest "where one must fall for the other to rise".

"We believe that the world is big enough for both of us," she said.

She said that the Biden administration's economic strategy is centered around investing in infrastructure, clean energy and technology manufacturing, "not suppressing or containing any other economy".

But the US has instituted controls on exports of semiconductors to China for chips used in artificial intelligence, supercomputers and for other purposes. A license would be required for such exports.

The CHIPS Act passed by the US Congress in August subsidizes new manufacturing of semiconductors, clean cars and solar panels in the US. The act includes $39 billion worth of subsidies for semiconductor manufacturing on US soil.

"When we think about these kinds of tensions between the United States and China and all these restrictive measures, we tend to think about punishing or hurting China or slowing down its progress," said Yukon Huang, senior fellow at the Carnegie Endowment for International Peace and former World Bank country director for China.

"We don't actually realize it also has a significantly negative effect on the United States, and it has very significant effects globally in a negative way," he said during a recent webinar examining US-China economic relations.

Yellen called for China to work with the US on challenges such as helping indebted countries and addressing climate change.

China has refuted criticism that it is burdening developing countries with debt. It is not the source of "debt traps" for African countries, but a partner that helps those nations get out of poverty traps, Foreign Ministry spokesman Wang Wenbin said on April 10.

He rejected the accusations as groundless, saying that they were a "narrative trap" fabricated by Western politicians in an attempt to disrupt cooperation between China and developing countries.

Scott Kennedy, a senior adviser at the Center for Strategic and International Studies, said Yellen's speech challenged the view that "the US and China are destined to decouple and fight a war", The New York Times reported.

He said the administration "has now clearly differentiated itself from the Trump administration in its approach to China".

Yellen said China should not provide material support for Russia in its conflict with Ukraine, threatening that the consequences of violating US sanctions on Russia "will be severe".

China denied the allegations, with Foreign Ministry spokeswoman Mao Ning telling a news briefing that the US has been pouring weapons into one side of the conflict, thus prolonging the fight and making peace elusive, while spreading disinformation that China would supply weapons to Russia.

The sanctions against Russia have also been questioned by several countries around the world, particularly the BRICS nations (Brazil, Russia, India, China and South Africa), who have discussed creating their own reserve currency to counter US economic sanctions.

Liu Pengyu, a spokesman for the Chinese embassy in Washington, said earlier: "China does not shy away or flinch from competition. However, we oppose defining the entire China-US relationship by competition, oppose the generalization of the concept of national security, and oppose decoupling even at the expense of global industrial and supply chains."

Yellen said she planned to travel to China "at the appropriate time" to engage in a "substantive dialogue on economic issues".