Security comes first in U.S.-China economic relations, says Treasury Secretary Yellen

Treasury Secretary Janet Yellen said on Thursday national security comes first even if it has an impact on the economic relationship with China, and "targeted actions" that Washington takes to protect its interests are not meant to give the United States a competitive economic advantage over China.

In a speech at Johns Hopkins University's School of Advanced International Studies in Washington, Yellen said the United States seeks a healthy economic relationship with China and needs to cooperate with it in key areas like debt overhang and climate change.

The remarks on China come at a time of deep tension and growing mistrust between Washington and Beijing, and are largely in line with broader Biden administration policies toward China — which the Chinese government has chafed at.

"First, we will secure our national security interests and those of our allies and partners, and we will protect human rights," Yellen said. "We will not hesitate to defend our vital interests. Even as our targeted actions may have economic impacts, they are motivated solely by our concerns about our security and values."

The U.S. is not out to gain advantage "or stifle China's economic and technological modernization."

Washington has adopted a number of measures in recent years that have taken aim at Chinese companies and industries, including sweeping export restrictions last fall on cutting-edge microchips and the gear to make them. Beijing says the moves are unfair and unjustified.

Economist Stephen Roach, of Yale University, suggested in a tweet that the prioritization of national security from both sides in China-U.S. relations is a bad sign.

But Yellen said a full economic split between China and the U.S. would be "disastrous". She said "a growing China that plays by international rules" is good for the United States and the world.

"Both countries can benefit from healthy competition in the economic sphere. But healthy economic competition — where both sides benefit — is only sustainable if that competition is fair. We will continue to partner with our allies to respond to China's unfair economic practices," she said.

The U.S. and its allies will continue to press China on those practices, she said, and "take coordinated actions" in response, like "friend-shoring" supply chains to mitigate vulnerabilities.

Yellen said she is planning to travel to China "at an appropriate time" for talks she hopes can help "lay the groundwork for responsibly managing our bilateral relationship and cooperating on areas of shared challenge to our nations and the world."

In recent months, however, the U.S. and Chinese governments have had difficulty getting traction in dialogue and arranging high-level meetings.

Secretary of State Antony Blinken postponed a visit to China after a Chinese balloon appeared in the sky over America earlier this year. And there has been no reported contact between President Biden and Chinese leader Xi Jinping recently, despite Biden saying in early March the two would talk "soon." Yellen's trip has been in the works for months.

Yellen said the U.S. economy was strong, and prognostications of its demise were misguided — a comment likely directed at Xi and other Chinese officials, who regularly talk about the decline of the West.

She said China, as the world's biggest bilateral creditor nation, needs to work with the U.S. and others to participate in "meaningful debt relief." For too long, she said, "it has not moved in a comprehensive and timely manner. It has served as a roadblock to necessary action."

"Prompt action on debt is in China's interest. Delaying needed debt treatments raises the costs both for borrowers and creditors. It worsens borrowers' economic fundamentals and increases the amount of debt relief they will eventually need," she said.

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