Yellen criticises China’s ‘punitive’ measures against US companies, but says decoupling ‘impossible’

US Treasury Secretary Janet Yellen on Friday (July 7) criticised China for its recent ‘punitive’ measures against US companies as she stressed the need for market reforms in the world’s second-largest economy. Yellen is on a four-day China visit. She arrived in Beijing on Thursday. Yellen maintained that complete decoupling of the US and Chinese economies was “impossible”. She is the second high-ranking US official to visit China in recent months.

Yellen was speaking at the American Chamber of Commerce in China (AmCham) after “substantive” talks with former Chinese economy czar Liu He, who is a close confidante of President Xi Jinping.

Watch | Xi Jinping sees red as US aims to curtail technology investment in China | Yellen in Beijing

The US has said in recent months that it was seeking to “de-risk” from China by limiting its access to advanced tech deemed crucial to Washington’s national security.

The US has also blacklisted a number of Chinese companies in order to prevent their access to the most-advanced chips and has pushed allies to follow suit.

No ‘wholesale separation of economies’

Yellen sought to stress that there were no plans to completely separate the two 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 representatives of US businesses at a session hosted by the American Chamber of Commerce in Beijing.

“And it would be virtually impossible to undertake.”

Just before Yellen’s visit, China announced new export controls on two strategic metals that are necessary for semiconductor manufacturing on national security grounds. This was seen as Beijing’s latest salvo in the chips war.

On Friday, Yellen told US businesspeople that 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.

Amid the strained relations between the US and China, the latter did strike some optimistic note about Yellen’s visit.

On Friday, the Chinese foreign ministry said that Yellen’s visit would “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.

A US Treasury official said that on Friday morning, Yellen had a “substantive conversation” with former vice premier Liu He, who was her previous counterpart. Yellen also spoke with the outgoing governor of China’s central bank, Yi Gang, 

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

Yellen is due to meet China’s Premier Li Qiang in the afternoon on Friday. The meeting gives a chance to both sides to discuss their economic relationship, convey concerns and explore collaboration opportunities.

(With inputs from agencies)

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