Yellen Urges Fair US-China Economic Relations, Warns Of Consequences Amid Rising Tensions

U.S. Treasury Secretary Janet Yellen gave a speech on the U.S.-China economic relationship at the School of Advanced International Studies at Johns Hopkins University in Washington on Thursday. 

In her prepared remarks, Yellen advocated for a constructive and fair U.S. economic relationship with China in order to foster growth and innovation in both countries. 

"China has pivoted away from market reforms in recent years" and has undertaken a "confrontational posture against the United States and allies," Yellen said on Thursday. 

The Treasury Secretary stated that the United States will remain steadfast in its defense of national security interests and values and will not compromise on these issues, even if they cause trade-offs with economic interests.

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US-China Economic Relations Are Based On Three Key Pillars

Yellen said that the US-China economic relationship is built on three key pillars:

1) Safeguarding national security interests and protecting human rights.

2) Improving healthy economic competition to boost both countries' growth and innovation.

3) Collaborating on pressing global issues such as climate change and debt relief. 

The Threat of Further Targeted Sanctions Exists
The United States is ready to take targeted actions and policies, such as export controls and restricting access to companies, if China poses a threat to these principles, the Treasury Secretary said.

"China's economic growth will not have to be incompatible with U.S. economic leadership," she added.

Regarding Russia's war in Ukraine, Yellen said that "China’s no limits partnership and support for Russia is a worrisome indication. It’s essential that China or other countries do not provide support with sanctions evasion, otherwise, the consequences will be severe". 

Yellen added that Beijing's human rights abuses in Shin Jang, Tibet and Hong Kong will continue to be sanctioned and that the United States will restrict the import of goods produced with forced labor in Shin Jang. 

The Treasury Secretary also stated that the two economies are "deeply integrated with one another" and that a total decoupling from China would be a "disaster" for both nations, as well as the rest of the world.

Market Reactions: Alibaba Group Holding Limited BABA, the largest Chinese company listed on the U.S. stock market, fell 1.4% after the speech.

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Photo: International Monetary Fund on flickr