Amid the ongoing standoff between the USt and China, whether Treasury Secretary Yellen’s visit to China will have major breakthroughs

U.S. Treasury Secretary Janet Yellen leaves this week for a four-day visit to China. This is the second important US government official to visit China within a month after US Secretary of State Blinken, and the first visit by a US Treasury Secretary to China in nearly five years. While the visit has been long anticipated, it is widely seen as unlikely to produce a major breakthrough against a backdrop of deteriorating relations between the US and China.

Just as Yellen was about to depart, China on Monday announced export controls on items related to gallium and germanium, two raw materials critical to chip production. This is another major measure taken by China to control rare metals after China restricted rare earth exports to Japan in 2010 due to maritime friction with Japan.

China dominates the industry for both rare metals, accounting for up to 98% of global primary low-purity gallium production, according to the U.S. Geological Survey.

Breakthroughs on key issues are unlikely

CNN quoted unnamed senior U.S. Treasury Department officials Tuesday as saying that while the visit marks another high-level contact between the two superpowers, “major breakthroughs” are not expected.

The last time the US Treasury Secretary visited China in 2019, Washington and Beijing were embarking on a long economic conflict. In recent years, many of the problems that have caused the deterioration of economic and trade relations between the two countries have not only remained, but have even intensified.

In addition to the Trump-era tariffs on Chinese goods that remain in effect, the number of Chinese entities on the U.S. sanctions list has now expanded to more than 1,000. On the extremely sensitive issue of the chip ban, the United States recently planned Yellen’s visit to China while also reportedly planning to further tighten the export ban announced last October restricting the sale of artificial intelligence chips to China. In addition, in response to the possibility that Chinese companies could circumvent the ban through cloud computing, the Wall Street Journal reported Tuesday that the United States is preparing to restrict the use of American cloud computing services by Chinese companies.

Zhu Min, a former deputy governor of the People’s Bank of China, told state media ahead of Ms Yellen’s visit that the US President had promised to remove tariffs on China but had not done so, and that if Ms Yellen, the US Treasury secretary, also visited China in the near future, then “removing tariffs on China, withdrawing the ‘301’ investigation and sorting out the phase one trade agreement will be the topics that the two sides need to focus on.”

“China wants to tell the United States to abandon its past policies, and of course Yellen will not accept that,” Yu Weixiong, an economics professor at UCLA’s Anderson Forecast Center, told VOA. “So I think you have to expect some concrete results that both sides will agree on, and the chances are probably not good.”

U.S. market Research firm 22V Research said in a report this week that Yellen’s visit should not be expected to yield concrete results in bilateral economic relations. On multilateral issues, such as debt relief for developing countries and climate finance, the dialogue is likely to go more smoothly. “The most contentious bilateral economic issues – tariffs and export controls – are outside Yellen’s mandate and are highly unlikely to change given current tensions between the two countries, domestic political sentiment toward China, and Beijing’s limited willingness to make major concessions to Washington,” the note to clients said.

Under economic pressure, China is willing to restart talks

Although normal high-level exchanges between the U.S. and Chinese militaries have been delayed, China does not seem to be avoiding exchanges and dialogue between senior economic and trade officials of the two countries. Yellen’s visit follows a visit to the United States last month by Chinese Commerce Minister Wang Wentao, who met with U.S. Commerce Secretary Raymond Mundo.

Daniel DePetris, a researcher at Defense Priorities, a Washington think tank, said Beijing viewed high-level military communications as a way to exert influence over the United States, “Beijing is concerned that these communications will normalize similar freedom-of-navigation operations by the United States in the Taiwan Strait, which it adamantly opposes.”

China’s willingness to talk to the United States on the economic and trade front, he said, is partly due to the fact that as it struggles to revive its economy to a desired level after three years of the coronavirus pandemic, “it is in China’s interest to engage with U.S. officials like Treasury Secretary Janet Yellen and Commerce Secretary Raymond Mundo.” Dipetris said in an email to VOA.

From weak consumer spending, a property crisis, slumping exports, record youth unemployment and high local government debt, China’s economy is now facing a series of serious crises. Making matters worse, governments have little to do in the face of these crises. China’s official manufacturing purchasing managers’ index, released on Friday, edged up to 49 in June, but missed expectations.

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Mr. Dusterberg of Hudson Research said the reason China would host Ms. Yellen, and had a conversation with Mr. Raimondo a few weeks ago, “is because the Chinese economy is in bad shape.”

The former U.S. assistant secretary of Commerce for international economic policy said China has very limited ability to stimulate growth through domestic consumption or investment, and “therefore wants to reduce tensions with the United States and wants to reopen access to our financial markets and import markets.”

Yu Weixiong, an economics professor at the University of California, said that China’s economic problems are now “very big,” and he desperately hopes that Western countries can re-invest in China, do business with China and buy Chinese things as they did in the past, and “better yet, all the embargoes can be lifted.”

Laying the groundwork for future dialogue

While a major “breakthrough” is unlikely, Treasury officials told Reuters they hope Yellen’s trip will lead to constructive dialogue and a longer line of communication with China’s new economic team, including at the sub-ministerial level.

China recently appointed its top financial official, Pan Gongsheng, a deputy governor of the People’s Bank of China and head of the State Administration of Foreign Exchange, as the central bank’s Communist Party chief and likely successor to Yi Gang, a familiar figure in the West.