Washington Correspondent
Janet Yellen left to present the Biden Administration’s new message to China directly to Beijing. The Treasury Secretary’s four-day visit to China’s capital follows that of US Foreign Minister Antony Blinken last month. Janet Yellen’s trip is presented above all as a mission to clarify Washington’s position with regard to the leading Asian power. The fact that Joe Biden called President Xi a “dictator”, while Antony Blinken had just returned from Beijing where he had been able to meet the Chinese president, does not facilitate the task of the soon-to-be 77-year-old economist.
Janet Yellen does not go to Beijing to negotiate solutions to the many disputes between her country and China. The multiple trade sanctions imposed under Donald Trump, supposed to force China to change its practices deemed unfair by most American elected officials, are still in place. Worse, their list is continually growing to now encompass growing bans on purchases of US technology and equipment and soon new restrictions affecting US industrial investment in China. However, despite the tensions, the interdependence between the two largest economies in the world remains very strong. Last year, their trade exchange broke a new record at more than 690 billion dollars. The largest supplier of the United States, China has a large trade surplus.
The White House seems surprised that its relations with Beijing have become execrable. The new word that obsesses the Biden Administration has become “communication”. From a military, diplomatic or commercial point of view, Washington hopes to re-establish direct modes of dialogue, to avoid at all costs the misunderstandings that could lead to uncontrollable crises. “Failing to resolve our many differences, at least let’s agree to talk about them often and calmly,” the Biden Administration essentially wishes.
Beijing’s distrust of US agitation to “manage responsibly, communicate directly about areas of concern, and work together to address global challenges” – as the Treasury Department proclaims – is understandable. For the past few months, however, the communist regime’s pleas of inadmissibility with regard to attempts at dialogue initiated by Washington have become more uncomfortable: the Chinese economy is emerging much less than expected from long months of confinement. Growth falters; the foreign investment so important to its past development is drying up. A thaw of the Sino-American dialogue would serve Chinese interests.
The rise in America, but also in Europe, of an economic decoupling movement with regard to China, aimed at reducing dependence on Chinese factories and the Chinese market, and ultimately making it possible to diversify supply chains production for the benefit of countries like Vietnam or India, is beginning to weigh. Aware of this possibility of openness, Joe Biden and his cabinet have designed a new message for China. The old message was summed up in three words: “Invest, Align and Compete”. It has been abandoned since April in favor of a new formula articulated by Jake Sullivan, adviser to Joe Biden for security affairs: “a small garden, a high barrier”.
The old formula encouraged investment in the United States to counter the push of Chinese export industries. He then advocated aligning US strategy with US allies to manage Chinese expansionism. Finally, he enshrined healthy economic and commercial competition as a means of overcoming friction. As Yeling Tan, of the Peterson Institute for International Economics in Washington, explains, this approach did not sit well with Beijing: “The problem with this formulation was that the first element of the strategy focused on the internal issues of the United States, the second on US relations with other countries, which left “compete” as the only descriptor of the desired relationship with China.”
Beijing judged, not without reason, that the sole objective of American policy towards China was in fact to “decouple and cut off supply chains from China… while using national security imperatives to eliminate Chinese companies in an unjustified way”, to use the words of the Chinese spokespersons. Janet Yellen hopes to convince that the United States is not trying to disrupt China’s development.
It therefore abandons the word “decoupling” to replace it with that of “risk reduction” (“derisking”). The nuance is that the idea is not to cut itself off from China, but simply to diversify the supply of American industries and consumers. The “high barrier” mentioned by Jake Sullivan is that of advanced technologies, with obvious military uses, such as artificial intelligence, where America still has a real lead, and which must absolutely be preserved. The “little garden” is supposed to describe a more restricted perimeter of strategic sectors to be protected.
For the moment, Beijing hardly believes in it. Joe Biden’s continuation of 7.5% to 25% surtaxes imposed by Donald Trump on more than $360 billion in Chinese imports, ranging from washing machines and solar panels to computer equipment and furniture , contradicts the definition of “small garden”.
Janet Yellen, a seasoned economist, has certainly often expressed reservations about the effectiveness of the protectionism practiced by Donald Trump in the name of industrial sovereignty. But she will stay true to the line set by President Biden. The latter, campaigning for his re-election, does not want to appear accommodating and make concessions to Beijing. Especially since the anti-Chinese consensus in Congress is largely bipartisan. It will take a lot of talent for the Treasury Secretary to convince her interlocutors that American policy towards China has really changed.
