ZURICH, Switzerland
U.S. Treasury Secretary Janet
Yellen sits down with her Chinese counterpart Wednesday in the highest-ranking
contact between the two countries since their presidents agreed to look for
ways to improve relations that have grown increasingly strained in recent
years.Treasury Secretary Janet Yellen
Yellen's first face-to-face
meeting with Vice Premier Liu He comes as the U.S. and Chinese economies
grapple with differing but intertwined challenges on trade, technology and
more.
The Chinese economy is
reopening after a COVID-19 resurgence killed tens of thousands of people and shuttered
countless businesses. The U.S. is slowly recovering from 40-year high price inflation and is on track to hit
its statutory debt ceiling, setting up an expected political
showdown between congressional Democrats and Republicans. The debt issue is of
keen interest to Asia, as China is the second-largest holder of U.S. debt.
There is also the Russian
invasion of Ukraine, which continues to hinder global economic growth — and has
prompted the U.S. and its allies to agree on an oil price cap on Russia in
retaliation, putting China in a difficult spot as a friend and economic ally of
Russia.
And high interest rates
globally have increased pressure on debt-burdened nations that owe great sums
to China.
“A wrong policy move or a
reversal in the positive data and we could see the global economy head into a
recession in 2023,” said Josh Lipsky, senior director of the Atlantic Council’s
GeoEconomics Center. “Both countries have a shared interest in avoiding that
scenario."
The World Bank reported last
week that the global economy will come “ perilously close ” to a recession this year, led by
weaker growth in all the world’s top economies — including the U.S. and China.
Low-income countries are expected to suffer from any economic downturns of
superpowers, the report said.
“High on the list is debt
restructuring,” Lipsky said of Wednesday's talks. Several low-income countries
are at risk of debt default in 2023 and many of them owe large sums to China.
“Leaders have been trying for
two years to get some agreement and avoid a wave of defaults but there’s been
little success and one reason is China’s hesitancy. I expect Yellen to press
Liu He on this in the meeting,” Lipsky said.
Liu laid out an optimistic
vision for the world’s second-largest economy in an address Tuesday at the
World Economic Forum in Davos, Switzerland.
“If we work hard enough, we
are confident that in 2023, China’s growth will most likely return to its
normal trend. The Chinese economy will see a significant improvement,” he said.
After her stop in Switzerland,
Yellen will travel to Zambia, Senegal and South Africa this week
in what will be the first in a string of visits by Biden administration
officials to sub-Saharan Africa during the year.
Zambia is renegotiating its
nearly $6 billion debt with China, its biggest creditor. During a closed-door
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 imperative to conclude 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 Group of 20 summit in Bali, Indonesia. The two
world leaders agreed to empower key senior officials to work on areas of
potential cooperation, including tackling climate change and maintaining global
financial, health and food stability. Beijing had cut off such contacts with
the U.S. in protest of then-House Speaker Nancy Pelosi’s trip to Taiwan in
August.
“We’re going to compete
vigorously. But I’m not looking for conflict," Biden said at the time.
U.S. Secretary of State Antony
Blinken will be traveling to China in early February.
Among economic sticking
points, the Biden administration blocked the sale of advanced computer chips to
China and is considering a ban on investment in some Chinese tech companies,
possibly undermining a key economic goal that Xi set for his country. Statements
by the Democratic president that the U.S. would defend Taiwan against a Chinese
invasion also have increased tensions.
And while the U.S. Congress is
divided on many issues, members of the House agreed last week to further
scrutinize Chinese investments.
New House Speaker Kevin
McCarthy of California has identified the Communist Party of China as one of
two “longterm challenges” for the House, along with the national debt.
“There is bipartisan consensus
that the era of trusting Communist China is over,” McCarthy said from the House
floor last week when the House voted 365 to 65 — with 146 Democrats joining
Republicans — to establish the House Select Committee on China.
Last year, the U.S. Commerce
Department added dozens of Chinese high-tech companies, including
makers of aviation equipment, chemicals and computer chips, to an export
controls blacklist, citing concerns over national security, U.S. interests and
human rights. That move prompted the Chinese to file a lawsuit with the World
Trade Organization.
Yellen has been critical of China's trade practices and its
relationship with Russia, as the two countries have deepened their economic
ties since the start of the war in Ukraine. On a July call with Liu, Yellen
talked “frankly" about the impact of the Russia’s invasion of Ukraine on
the global economy and “unfair, non-market” economic practices, according to a
U.S. recap of the call.
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