U.S., China Officials Kickstart APEC Summit in San Francisco with Early Meeting

The Lede: U.S. Treasury Secretary Janet Yellen and Chinese Vice Premier He Lifeng spoke over two days of meetings from Thursday and Friday in San Francisco in an effort to stabilize the economic relationship between the two countries and make progress on some key issues including trade, investment, and supply chains ahead of the upcoming meeting between U.S. President Joe Biden and Chinese President Xi Jinping at the 2023 APEC Summit.

What We Know:

• In their meetings, Yellen and He discussed pressing economic and financial issues including the recent tightening of U.S. semiconductor technology restrictions and China’s curbs on exporting rare-earth metals as well as the obstacles presented by the conflicts in Ukraine and the Middle East. The two also discussed the recent ransomware attack on a U.S. subsidiary of the Industrial and Commercial Bank of China (ICBC).
• According to the readout of the meetings from the Treasury Department, both sides agreed on important foundations for the U.S.-China economic relationship, which includes emphasizing that the two countries are not seeking to decouple their economics, working toward better communications to address disagreements and avoid misperceptions, and commitments to work together on shared challenges. The two sides also made commitments to work together on climate change-related issues as well as debt in low-income and emerging economies. 

The Background: The Yellen-He meeting precedes the gathering of ministers and leaders for the Asia-Pacific Economic Cooperation (APEC) forum this week. U.S. President Joe Biden and Chinese President Xi Jinping will meet on the sidelines of APEC on Wednesday in the first top-level U.S.-China meeting on American soil since 2017. Yellen met with He in July on her visit to Beijing. The Biden administration has sent top officials to China this year for high-level meetings, many of which have included meetings with President Xi. 

Likely Outcomes:

• The interactions between Yellen and He could strengthen ties between the rival powers, but that goal is far from assured. Both sides want clearer definition of each country’s boundaries and the maintenance of dialogue to manage areas of disagreement in their relationship. The rivalry will persist, but the officials both agree that the U.S. and China must not stumble into unintended escalations.
• There likely will be more flare-ups moving forward in all aspects of the U..S.-China rivalry from economy and trade to diplomacy and security, but there will be increased communication and dialogue as well as the superpowers have made strides since the beginning of the year when communications fell apart following the Chinese balloon incident this year. 
• The two sides remain at odds on their respective approaches to debt in low-income and emerging economies. The U.S. has started to ramp up its investment and loan extensions to such countries in an effort to counter China’s Belt and Road Initiative. The rivalry has begun to intensify as the U.S. makes overtures to countries that have been in China's sites for years. The announcement recently of planned U.S. largesse to Sri Lanka for the development of port terminals is one example.

Quotables:

"I think the Chinese feel that actions the United States has taken in some cases were surprises to the government and also to Chinese businesses" she said. "And the United States, I think feels, the same way, and American firms feel the same way about China's actions. What we would not want to see is some private-sector-led decoupling from China, especially one that's based on misinformation." - Janet Yellen, U.S. Secretary of the Treasury

Good Reads:

Yellen and Chinese vice premier agree on not decoupling economies (Nikkei)

READOUT: Secretary of the Treasury Janet L. Yellen’s Bilateral Meetings with People’s Republic of China Vice Premier He Lifeng in San Francisco, California (Treasury Department)