When Treasury Secretary Janet L. Yellen traveled to Beijing last summer, her mission was to restore dialogue between the world’s largest economies and stabilize a relationship that appeared to have hit rock bottom.
The United States and China have established formal economic working groups to continue the discussion. Months later, Ms. Yellen met with her Chinese counterparts in San Francisco and Morocco. And the Treasury Secretary’s consumption of a plate of psychedelic “magic” mushrooms at a Yunnan-style restaurant in Beijing sparked a culinary frenzy in China, where Ms. Yellen is popular as an accomplished economist.
But despite these signs of progress, thorny economic issues continue to divide China and the United States. When Ms. Yellen arrives Thursday for four days of meetings in Guangzhou and Beijing, the two sides are expected to exchange views on the state of the global economy, the Biden administration’s concerns about China’s surge in green energy technology exports and the frustration of Beijing to increase barriers to Chinese investment in the United States.
“We don’t want to decouple our economies,” Ms. Yellen said Wednesday during a stop in Alaska on her way to China. “We want to continue and we believe we both benefit from trade and investment, but it has to be on a level playing field.”
But he suggested the administration was prepared to take new trade actions against China to ensure the survival of the clean energy sector the United States is trying to develop through tax subsidies and other investments.
Here are some of the most contentious issues that have sown divisions between the United States and China.
A flood of clean energy exports
A top priority for Ms. Yellen will be to convey the Biden administration’s deep concerns that China’s glut of heavily subsidized green technology exports is distorting global markets.
Ms Yellen, during a visit to a solar cell factory in Georgia last week, argued that the surge in Chinese exports of electric vehicles, batteries and solar technology was problematic at a time when the United States is spending huge sums to try to develop these the industries. He argued that China was following the same lead it used when it flooded global markets with cheap, government-subsidized steel and aluminum, hurting American producers who were unable to compete.
On Wednesday, Ms. Yellen suggested that the United States could take steps to ensure that money spent as part of the deflationary law is not undermined by China’s practices.
“We provide tax subsidies in some of these sectors and I wouldn’t want to rule out other possible ways in which we would protect them,” he said when asked about the possibility of new tariffs on Chinese imports.
China has focused on factory production to boost its economy. Its exports, measured in dollars, rose 7% in January and February compared to last year. The increase in exports has also angered officials in the European Union, and the bloc announced last month that it was preparing to impose tariffs, which are import taxes, on all electric cars arriving from China.
China has pushed back against claims that its economy is in trouble and too dependent on exports. But it has set an ambitious economic growth target of “around 5 percent” for this year, and achieving it will depend largely on strong demand for products made by Chinese factories – electric vehicles, solar panels and consumer electronics.
US tariffs
The Biden administration has maintained tariffs on more than $300 billion in Chinese goods. These levies, first imposed by the Trump administration, remain a major source of tension between the two countries.
Ms. Yellen took office by saying the tariffs are taxes on consumers and argued that the Trump levies were poorly planned. But reinstating tariffs is particularly difficult in an election year, and Ms. Yellen is unlikely to be able to offer China much relief on that front.
The White House is considering easing some of the tariffs that hit US consumers and imposing new ones aimed at China’s green energy exports.
And another round of U.S. solar tariffs could come this summer, when President Biden’s two-year moratorium expires in 2022.
China has its own complaints about America’s trade policies and filed a complaint last week with the World Trade Organization alleging the Biden administration’s electric vehicle subsidy policies are discriminatory.
Cross-border investments
The United States and China say they welcome foreign investment, but their policies remain hostile.
US companies operating in China have complained over the past year that their offices have been searched and that they face harassment from Chinese authorities. Ms Yellen, who will meet with US business executives in Guangzhou, has sought clarity on the scope of a Chinese anti-espionage law that foreign companies believe will lead to additional government scrutiny.
China’s leaders are pushing to change the perception that the country is no longer a good place for foreign investors to put their money. Beijing has reason to worry: Foreign direct investment in China fell to three-decade lows last year, and the government has taken a series of measures that have left foreign businesses feeling the country is an increasingly hostile place to operate. Additionally, concerns about China’s economy have left many companies less willing to tolerate the trade-offs of doing business in the country.
Last month, Premier Li Qiang, China’s second-in-command, said the government was lifting restrictions on foreign investment to make the country a “favored destination” for foreign capital.
And Xi Jinping, China’s leader, met with a delegation of visiting US businessmen last week and said China remains committed to economic reform.
But in a sign of the mixed messages from Beijing, on the same day as Mr Xi’s meeting, China’s Ministry of State Security warned the public about the risk of intelligence from foreign consultants — the kind of consulting firms relied on overseas companies to operate investment due diligence.
The United States is also taking a tougher approach. During a conversation this week, Mr. Biden and Mr. Xi discussed the fate of TikTok, the social media platform owned by Chinese company ByteDance. The House of Representatives passed legislation last month that would have forced the sale of the company over national security concerns, and Mr. Biden has said he supports the bill, which still needs to pass the Senate to become law. China is expected to block the forced sale of TikTok, and Chinese officials are expected to raise the issue with Ms. Yellen.
The Biden administration is also trying to curb the flow of money to China, including banning new American investment in key technology industries that could be used to bolster Beijing’s military capabilities. It also limited China’s ability to take advantage of the Deinflation Act, the US Climate and Energy Act.
Penalties
As Treasury secretary, Ms. Yellen oversees the United States’ sanctions program, which in recent months has been increasingly aimed at China.
In late March, the United States and Britain imposed sanctions on China’s elite hacking units, accusing Beijing’s top spy agency of a years-long effort to plant malware on America’s power grids, defense systems and other critical infrastructure and of stealing the electoral rolls for 40 million British citizens.
Ms Yellen has been pressing China not to help Russia avoid US sanctions. During a speech last year, he expressed dismay at China’s “borderless” partnership with Russia and called it “essential” that China not provide material support or assistance to Russia to avoid sanctions.
The Treasury Department has also increasingly focused on Hong Kong-based companies that have been accused of helping Russia and Iran circumvent US sanctions.
Technology limitations
The United States has imposed sweeping restrictions on the sale of advanced computer chips, chip-making equipment and related products to China, saying Beijing has used those goods to develop advanced weapons and surveillance systems that run counter to U.S. national security interests.
China continues to face these restrictions. After the White House revised rules for exporting US artificial intelligence chips and chip-making equipment last week, China criticized the United States, saying it was arbitrarily changing the rules and creating more barriers to trade.
China sees the tighter controls as part of a U.S. strategy to block the country’s rise by limiting access to products critical to advancing artificial intelligence and other next-generation technologies.
Daisuke Wakabayashi contributed reporting from Seoul.
