Yellen says US taken ‘major steps’ to stabilise ties with China

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The US has taken “major steps” to stabilise relations with China, Treasury secretary Janet Yellen said as she ended her six-day visit designed to ease tensions with the US’s main economic rival.

During her trip to Guangzhou and Beijing, Yellen met He Lifeng, a key economic official, Li Qiang, President Xi Jinping’s number two, and central bank governor Pan Gongsheng. US officials said talks ranged from Chinese manufacturing overcapacity to the financial stability of the world’s second-biggest economy.

“It is undeniable that the US-China relationship is on a stronger footing today than this time last year,” Yellen said at the conclusion of her second official Treasury visit to China.

“This was not preordained. It was the direct result of President Biden’s guidance to me and his cabinet to intensify our diplomacy with China and put a floor under the relationship.”

Despite the cordial tone of the talks, tensions remain between Washington and Beijing, with Biden expected to warn Xi about meddling in the South China Sea later this week. 

Yellen’s trip followed a flurry of high-level contacts between the two sides in recent weeks. These included a phone call between Biden and Xi and a trip by US chief executives to Beijing to meet China’s leader.

The Treasury has called on China to stop over-subsidising its green-tech industry — a situation that US officials say risks flooding global markets with cheap solar panels, electric vehicles and lithium-ion batteries. “China is now simply too large for the rest of the world to absorb this enormous capacity,” Yellen said on Monday.

It was not clear what action, if any, China would take to address US concerns. State media has attacked US and European accusations of oversupply as hypocritical.

Much Chinese coverage has centred on Yellen’s visits to Chinese restaurants, her use of chop sticks and friendliness. But the nationalist Global Times said many Chinese people “don’t accept this”.

“The US has not stopped its negative actions toward China, with a stream of economic, trade, and technological containment actions against China, and an ever-growing list of sanctions against Chinese companies,” it said, calling for Washington to take “concrete actions” to uphold its “credibility”.