San Francisco Frontiers - Yellen says 'impossible' to decouple China, US economies

Yellen's four-day trip is her first to China as Treasury chief, and she is the second high-ranking US official to visit recently after Secretary of State Antony Blinken last month.

The United States has in recent months said it is seeking to "de-risk" from China by limiting the world's second-largest economy's access to advanced technology deemed crucial to Washington's national security.

The US has blacklisted a number of Chinese companies to prevent them from accessing the most advanced chips while pushing its allies to follow suit.

Yellen on Friday stressed that Washington was not seeking a "wholesale separation of our economies".

"We seek to diversify, not to decouple. A decoupling of the world's two largest economies would be destabilising for the global economy," Yellen told a meeting with representatives of US businesses at a session hosted by the American Chamber of Commerce in Beijing.

"And it would be virtually impossible to undertake."

Ahead of Yellen's trip, Beijing unveiled new export controls on metals key to semiconductor manufacturing on national security grounds, in the latest salvo in the chips war.

The Treasury secretary Friday told American businesspeople Washington was "concerned" about the curbs.

"We are still evaluating the impact of these actions, but they remind us of the importance of building resilient and diversified supply chains," she said.

- 'Win-win' -

Beijing has struck an optimistic tone about the visit, with China's finance ministry saying on Friday that it would serve to "strengthen communication and exchange between the two countries".

"The nature of China-US economic and trade relations is mutually beneficial and win-win, and there is no winner in a trade war or 'decoupling and breaking chains'," a ministry official said in a statement.

On Friday morning, Yellen had a "substantive conversation" with her previous counterpart, former Vice Premier Liu He, as well as the outgoing governor of China's central bank, Yi Gang, a US Treasury official said.

"They discussed the global economic outlook as well as the respective economic outlooks for the United States and China," the official added.

On Friday afternoon, Yellen is due to meet Premier Li Qiang at Beijing's Great Hall of the People, providing a chance to discuss the economic relationship, raise concerns and find opportunities for collaboration.

"Yellen actually appears to be a more down-to-earth member of the Biden administration," Tao Wenzhao, a fellow at the Chinese Academy of Social Sciences, told AFP.

"I think we welcome Yellen's visit, and this on a functional level should allow both sides to warm up to each other," he said.

"We are now reshaping, rebuilding China-US relations."

- 'Avoid misunderstanding'-

In a tweet after arriving on Thursday, Yellen said that although the United States would protect its national security when needed, "this trip presents an opportunity to communicate and avoid miscommunication or misunderstanding".

The United States does not expect specific policy breakthroughs this time, but hopes for frank and productive conversations that can pave the way for future talks, a US Treasury official told reporters on Thursday.

But, they said, "especially if they're things that we may disagree about, it's even more important that we're talking".

Tensions soared earlier this year when the United States detected and then shot down what it said was a Chinese spy balloon after the craft traversed its territory.

Blinken cancelled a visit to China over the incident but eventually travelled to the country in June.

During that trip, both sides agreed on the need to stabilise their relationship.

But Yellen faces an uphill struggle in persuading officials in Beijing that US actions -- such as tightened export curbs on high-end semiconductors -- are aimed at safeguarding national security and not an attempt to stifle China's economic rise.

Underscoring the challenges she could face, The Wall Street Journal reported that the US administration is mulling restricting Chinese firms' access to US cloud computing services provided by companies such as Amazon and Microsoft.

I.Wright--SFF