US Treasury Secretary Janet Yellen said this week that if the Biden administration issues the new rules to limit US investment in China, they will not be very damaging to trade between the two countries and will focus on national security concerns. .
“We are looking closely at outbound investment controls, and they would serve as a complement to the export controls we have in place, to ensure that we have covered all channels through which technologies that we believe raise national security concerns may be transferred to China,” Yellen said.
The rules, expected from the Biden administration sometime this summer, will focus on semiconductors, quantum computing and artificial intelligence, the Treasury secretary said.
Yellen added that they would be “limited in scope” and “would not be broad controls that would broadly affect US investment in China” or, in her view, “would have a fundamental impact in affecting the investment climate for China.”
The official made the comments in an interview with Bloomberg Television on Monday, on the sidelines of a meeting of finance ministers from the world’s largest economies in Gandhinagar, India.
Yellen explained that she had spoken with Chinese officials about the rules, saying:
“What I tried to explain to our Chinese counterparts is that our desire is to make these US policies clearly focused on national security, transparent and narrow, and not try to stifle economic progress in China. We have, and want to continue to have, , deep economic ties”.
Yellen was careful in her remarks to suggest that there is not yet a final decision on the rules for the investments.
Addition to export controls
The Biden administration’s effort over the past two years to prevent China from obtaining certain technologies, and a multi-year effort by the US to block certain Chinese tech companies from participating in essential infrastructure, such as 5G broadband systems, have enraged China.
More recently, the administration has implemented measures to prevent Chinese companies from buying state-of-the-art microprocessors and the equipment to make them.
These policies have led to accusations by China that the US objective is to block its economic progress to prevent it from playing a greater role in the global economy and international relations.
Those concerns were echoed after Yellen’s comments.
china responds
At a press conference on Monday, Chinese Foreign Ministry spokesman Mao Ning commented on the matter.
“China opposes the politicization of trade and technology issues by the United States,” he said. “It is in no one’s interest to impose arbitrary restrictions on normal technological cooperation and trade, violate the principles of the market economy and destabilize global industrial and supply chains.”
He added: “We look forward to the United States abiding by President Biden’s commitment not to seek to ‘disengage’ from China, halt China’s economic development or contain China, and create a sound environment for China-US trade and economic cooperation.” “.
In her remarks on Monday, Yellen stressed the administration’s desire to improve relations with China.
“Now we have a new economic team in China that we need to establish relations with. We need to return our relationship to a more stable place with more strength, and try to promote general understanding between our countries,” he said.
Chinese economic problems
Against the background of the discussion about US restrictions on foreign investment in China, there is mounting evidence that the Chinese economy is in trouble. Economic growth has slowed sharply and the yuan has lost value against other world currencies.
On Monday, official figures released by Beijing said the economy had grown by just 0.8% from the end of the first quarter of 2023 to the end of the second quarter, a much lower rate than expected.
Also this week, the country’s troubled real estate conglomerate Evergrande revealed that in 2021 and 2022 it lost more than $81 billion and still has $340 billion worth of liabilities, including some $140 billion to raw material suppliers and many thousands of Chinese who paid in advance for houses that were never built.
Evergrande has become a symbol of the country’s deeply troubled real estate sector, which is awash in bad debt.
In her remarks on Monday, Yellen highlighted China’s difficulties and said there was some danger that its weak economy could have an impact around the world.
“China has seen slower growth than expected in opening up from COVID. Consumer spending has been relatively weak. It appears that consumers are more focused on restoring their savings security, so growth has been slow when , as you know, youth unemployment is quite high there,” he said.
Furthermore, he said he expects a slowdown in China to have only a small impact in the US.
“Countries depend on China’s strong growth to promote the growth of their own economies, particularly countries in Asia, and China’s slow growth may have a negative spillover effect on the United States,” he said.
“Our growth has slowed, but the labor market is still quite strong and I don’t expect a recession,” he concluded.
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