US Secretary of the Treasury Janet Yellen on Thursday called for China to shift from a state-driven approach in economic policy, saying the model could discourage investors.
“Too strong a role for state-owned enterprises can choke growth, and an excessive role for the security apparatus can dissuade investment,” she added, speaking at the US-China Business Council’s 50th anniversary dinner in Washington.
US companies have long complained about what they see as an unfair business environment in China, with limited protection for intellectual property and preferential treatment afforded to Chinese domestic competitors.
Photo: AFP
The fears were worsened this year by a crackdown on consulting firms operating in China and changes to an anti-espionage law that gives Beijing more power than ever to punish what it deems threats to national security.
Citing a recent US-China Business Council member survey, Yellen said that firms were reconsidering investment plans and said that should be concerning for Beijing.
A bigger proportion of companies signaled plans to move some operations out of China in this year’s survey compared with any other year since 2016.
The trends point to potential benefits in China “pursuing structural reforms,” Yellen said.
“For too long, American workers and firms have not been able to compete on a level playing field with those in China,” she added.
“The PRC deploys unfair economic practices, from non-market tools, to barriers to access for foreign firms, to coercive actions against American companies,” Yellen said, referring to the People’s Republic of China.
At Thursday’s dinner, the two countries’ ambassadors read letters from US President Joe Biden and Chinese President Xi Jinping (習近平) — with Xi laying out a competing view to that of Yellen, saying there was “great potential” for “strengthening China-US trade cooperation.”
He added that Beijing would “unswervingly promote high-level opening up to the outside world, and create a market-oriented, rule of law-based, internationalized business environment.”
“Chinese modernization will bring more opportunities to global enterprises, including American ones,” the letter continued.
Yellen also laid out priorities for US-China economic ties next year, saying that relations between the world’s two biggest economies would continue to face challenges.
“We seek not to resolve all our disagreements nor avoid all shocks. This is in no way realistic,” she said.
However, Yellen added that Washington aims to “make our communication resilient.”
When both sides disagree and shocks occur, this would help “prevent misunderstanding from leading to escalation and causing harm,” she said.
Officials have sought to put a floor under relations as tensions have soared in recent years — with both countries clashing on issues such as human rights and export controls.
Yellen said that her next trip to China would include discussing “difficult areas of concern.”
The US would hold firm on its commitment to clear communication on topics such as outbound investment restrictions and keep pushing China on national security issues, she added.
Other priority areas include “pressing for clarity on China’s economic policies and policymaking to better inform our own decisionmaking,” she said.
“Understanding China’s plans, especially how China intends to respond to challenges with local government debt and the real estate market or how it might react if unexpected weaknesses in its economy should arise, is crucial,” she said.
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