US, China agree to hold talks on ‘balanced economic growth’

US Treasury Secretary Janet Yellen attends a gaggle with media after meeting with Chinese counterpart He Lifeng in Guangzhou – Copyright AFP Pedro Pardo

The United States and China have agreed to hold “intensive exchanges on balanced growth”, the US Treasury Department said in a statement, after two days of talks between Treasury Secretary Janet Yellen and her Chinese counterpart He Lifeng in Guangzhou.

The planned talks mark the latest step forward in joint efforts to stabilise rocky ties between the world’s two leading economies since a meeting between presidents Joe Biden and Xi Jinping last November.

“These exchanges will facilitate a discussion around macroeconomic imbalances, including their connection to overcapacity, and I intend to use this opportunity to advocate for a level playing field for American workers and firms,” said Yellen in a separate statement on Saturday.

Overcapacity is seen by the United States as huge Chinese subsidies — to industries such as solar, electric vehicles and batteries — risking a surplus of cheap goods that threatens those sectors elsewhere.

After warning Friday that China’s overcapacity could pose risks to economies around the world, Yellen told the media that she discussed the issue for “more than two hours” during Saturday morning talks with He.

Beijing has dismissed concerns over its vast state support for industry, last month condemning an EU probe into its subsidies for EVs as “protectionism” and part of a Western effort to politicise international trade.

But Yellen suggested Saturday that some progress had been made in getting the two sides to see eye-to-eye.

“I think the Chinese realise how concerned we are about the implications of their industrial strategy for the United States, for the potential to flood our markets with exports that make it difficult for American firms to compete, and that other countries have the same concern,” said Yellen.

“It’s not going to be solved in an afternoon or a month,” she said, hailing the agreement for fresh talks for “(providing) a structured way in which we can continue to listen to one another and see if we can find a way forward that will avoid conflict”.

– Beijing-bound –

Yellen now heads north to Beijing, where she will have a two-day visit involving more high-level discussions with Chinese leaders.

This visit to China — her second in the past year — comes as Washington and Beijing feud over everything from access to advanced technology, the self-ruled island of Taiwan and video app TikTok.

The US treasury secretary also warned Saturday of “significant consequences” if Chinese firms aid Russia, whose February 2022 invasion of Ukraine has not been condemned by Beijing.

“Secretary Yellen emphasized that companies, including those in the PRC, must not provide material support for Russia’s war against Ukraine, including support to the Russian defense industrial base, and the significant consequences if they do so,” the US Treasury said in a statement, referring to the People’s Republic of China.

“We’ve been clear with China that we see Russia as gaining support from goods that China, Chinese firms are supplying to Russia,” Yellen told journalists in Guangzhou.

“Neither of us want this to be an issue with our bilateral relationship. So we’re working together,” she said.

– ‘Shared challenges’ –

The US Treasury readout also said the two sides had made a “commitment to work together on shared challenges, including climate finance and debt issues in low-income and emerging economies”.

They agreed to explore ways to step up a joint crackdown on money laundering through exchanges under a US-China “financial working group”, with a first meeting to be held “in coming weeks”, the statement said.

The exchange comes after repeated calls by Washington for Beijing to stem the flow of fentanyl and related precursor chemicals from plants in China, often sold via illicit financial transactions to buyers in North America.

Biden and Xi agreed to cooperate on the issue of drug trafficking during their summit in November, with the two governments holding several related working meetings since then.

Relations have stabilised somewhat since the two top leaders met in San Francisco for talks that both sides described as a qualified success.

Yellen’s July 2023 visit helped restart dialogue after a period of heightened tensions, notably over Taiwan, and culminated in the launching of bilateral working groups on economic and financial policy.

US Secretary of State Antony Blinken is also expected to make another China trip in the coming weeks, a sign that both sides are returning to more routine engagements.