US Treasury Secretary Janet Yellen in China to revive economic dialogue, ease rival tensions

Confirming details of the trip earlier this week, the US Treasury said Yellen would also be talking with Chinese officials in Beijing about the importance of direct communication “on topics of concern” and about how to “work together to address global challenges” and “also seek to cooperate on urgent global challenges like climate change and debt distress”.

On Monday, China announced it would set limits on the export of germanium and gallium, the rare metals needed for semiconductors and electric vehicles. Starting as of 1 August, exports would only be permitted if exporters receive licenses from the ministry.  

This is a clear reaction to the Netherlands placing restrictions on the export of sophisticated machinery to China, which connects to the Biden administration’s 2022 decision to place limitations on China’s imports of the kind of machinery which would aid the Asian nation’s development of AI and other advanced computing. Specific sanctions were made against Chinese businesses that had supplied Russian military networks.

In a speech in April this year, Yellen said of the US security measures which have aggravated tensions with China, “these national security actions are not designed for us to gain a competitive economic advantage, or stifle China’s economic and technological modernisation.”  

Over the next three days in Beijing, Chinese officials will in all likelihood want to know if they can expect further trade restrictions from the US on security grounds. 

Click here for the list of US sanctions against China. 

China produces around 60% of the world’s germanium and around 80% of the world’s gallium but lacks the technology of Taiwan which dominates the industry, producing 90% of the world’s most advanced chips and the US which produces the world’s most sophisticated chips — the ones that run sophisticated military and industrial devices. 

At the start of this July, China’s revised counter-espionage law took effect — which allows for more control over data and financial records. The move sent alarm bells ringing in the foreign business communities in China and prompted the US National Counterintelligence and Security Centre to warn American businesses about increased risk in doing business with China. 

Yellen has for months made it clear that she wants to visit China and has also stated that China and the US “can and need to find a way to live together”. In June, she told the House Financial Services committee that decoupling from China would be an extremely bad idea: “De-risk? Yes. Decouple? Absolutely not.” 

Yellen also said the US should lend more money to developing nations, to put a damper on China’s growing economic influence.

“These investments will bolster our engagement in these regions at a time of geopolitical competition,” and that such loans would “serve as an important counterweight to nontransparent, unsustainable lending from others like China.” 

She was referencing China’s Belt and Road Initiative (BRI), launched in 2013, as a way for China to invest in Africa and other developing countries, and support those countries’ infrastructure development at the same time. But China has also helped itself generously along the way.

Read more in Daily Maverick: Belt and Road tightening: Is the ‘Silk Road’ unravelling?

Many reports on the project show that where the project has been implemented in Africa, it brought not only roads but also Chinese workers and dragged some countries deep into debt which they cannot service. The Africa Report in April 2021 ran an article which stated that at that time, 36 African states had BRI projects running (Egypt, Kenya, Nigeria, Algeria, Tanzania, Mozambique and Uganda to name a few).

By 2022, some reports cited that 56 African countries were part of a total global number of 147 countries which have BRI agreements in place with China. 

Recent reports point to the BRI facing a post-pandemic decline, further influenced by Russia’s war on Ukraine, and pushback around debt by countries who are already struggling economically. But while the “project of the century” may be slowing down, it looks to still be a long way from becoming a dead end. DM