Yellen reportedly weighs China visit, US debt and tariffs could be discussed
US debt, tariffs, follow-up trade deal could be discussed
Published: Aug 12, 2021 08:18 PM
Janet Yellen.File photo:Xinhua

Janet Yellen.File photo:Xinhua

The US is eager to increase communication with China at a time when it is facing pressure from domestic businesses to reset China-US relations as well as its own challenges like mounting debt, economists said on Thursday, following a media report that US Treasury Secretary Janet Yellen is weighing a trip to China in the coming months. 

In a report on Thursday, Bloomberg cited sources as saying that the US Treasury's discussions about a visit to Beijing remain "in the early stages". If the visit takes place, Yellen is likely to meet Chinese Vice Premier Liu He, and she would be the highest-ranking Biden appointee to visit China. 

In response to the news, US Treasury spokesperson Lily Adams said that there are no plans for Yellen to travel to China in the autumn, Bloomberg reported. 

Economists in China have interpreted Yellen's potential visit as a hint by the US government that it is willing to increase communication with China, although US officials hope China would take the initiative and invite them for talks. 

"The US might want to discuss the two countries' economic common ground and work out some mutually beneficial cooperation, despite its political noise against China," Xi Junyang, a professor at the Shanghai University of Finance and Economics, told the Global Times. 

The US' inclination to enhance communication, and reset relations with China, comes as the Biden administration is engaged in a broad review of policy toward China. Meanwhile, the US government is also facing increasing pressure from its commercial circles to reverse hostile trade and technology policies against China.

According to media reports, dozens of US business groups are recently urging the Biden administration to restart China-US trade talks and cut import tariffs on Chinese goods, after they sensed the harm caused by those tariffs on their business. 

Gao Lingyun, a trade expert at the Chinese Academy of Social Sciences in Beijing, said that one important issue that Yellen is likely to discuss with Chinese officials is the US' rising debt, as the country has hit federal borrowing limit and is at risk of a default soon unless Congress raises or abolishes the debt limit, a risk that Yellen has warned of in a letter she wrote to Congress recently. 

"Because of the default possibilities, overseas countries' investment in the US is subject to uncertainties. Under these circumstances, the US wants China to provide some help, such as stating its confidence in the US economy or continuing to buy US debt," Gao told the Global Times.

From March to May, China reduced holdings of US Treasury bonds by $26.2 billion. Other countries like Russia and France took similar moves in recent years. 

In return, the US is likely to relax policies on the import tariffs. This could include measures to exempt more products and companies from the tariff list, or scrap those tariffs, Gao said. "The former is more likely." 

Xi said that the US might ask China to make concessions, such as buying more products from the US, on condition of adjusting tariffs on goods from China, as Washington sees that higher tariffs have not worked in punishing the Chinese economy. 

Song Guoyou, deputy director of the Center for American Studies at Fudan University, said that Yellen might talk with Chinese officials about a follow-up arrangement after the phase one trade deal. But he said that the Biden administration is not entirely clear about its policy direction concerning China, and that Yellen's potential visit does not signify a warming of China-US relations. 

Experts also noted that the results of Yellen's talks will have a direct influence on the US mid-term elections in 2022. "If the talks lead to measures beneficial to the US economy, such as China promising to buy a large amount of US goods, it will be a bonus for Biden," Xi said.