Janet Yellen in China: what's on the table as Washington's 'effective emissary' begins her trip?

US Treasury Secretary Janet Yellen would be viewed in China as an "effective emissary" to manage trade tensions, but analysts are watching for any meaningful results from her week-long trip, which starts on Thursday.

The planned visit follows Tuesday's "candid" and "constructive" phone call between President Xi Jinping and US counterpart Joe Biden, and is seen as another bellwether of relations between Beijing and Washington ahead of November's presidential election.

The US Treasury confirmed on Tuesday that Yellen's itinerary in the southern city of Guangzhou and capital city of Beijing would include meetings with economists, American businesses, Guangdong governor Wang Weizhong and Beijing mayor Yin Yong.

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Premier Li Qiang, Vice-Premier He Lifeng, Minister of Finance Lan Fo'an, central bank governor Pan Gongsheng and Liu He, China's former vice-premier who led previous trade negotiations with the US, would also meet with Yellen during trip, the US Treasury statement added.

"Secretary Yellen is widely respected and is seen as an effective emissary because she focuses on the issues and doesn't let side problems get in the way of the discussion," said Cameron Johnson, a Shanghai-based senior partner at consultancy firm Tidalwave Solutions.

Johnson added that trade is "a key driver in the US-China relationship and its ballast" could help reach the goal of maintaining "fairly stable ties" in a US election year, so "it does not affect the outcome of the election".

Yellen, seen as one of the most dovish members of the Biden administration, is on a mission to "press Chinese counterparts on unfair trade practices", as well as industrial overcapacity, and to discuss cooperation in the fight against illicit finance, financial stability, climate change and debt relief of some developing countries, according to the US Treasury statement.

Her trip - having last visited China in July - is expected to precede a visit by US State Secretary Antony Blinken, although details have yet to be revealed.

"The most challenging part for bilateral relations is the trade war and the tariff issues, following that is the US restrictions on tech-related bilateral [foreign direct investment]," said Dong Jinyue, a senior economist at BBVA Research.

She added that the military issues related to Taiwan and South China Sea are "equally challenging" compared to economic differences, but dealing with trade and investment is "easier to maintain the status quo".

During Tuesday's phone call, Xi raised the "endless measures" by the US to suppress China's economy, trade, science and technology, and a "longer and longer" list of sanctions against Chinese firms.

"If the US is willing to carry out mutually beneficial cooperation and share the dividends of China's development, China's door will always be open," said Xi, according to the state-backed Xinhua News Agency.

"However, if the US insists on suppressing China's hi-tech development and depriving China of its legitimate right to development, we will not sit idly by."

But Alicia Garcia-Herrero, chief economist for Asia-Pacific at Natixis, doubted whether there could be quick results over such issues, including overcapacity, during Yellen's visit.

"I don't think China has a solution for that because very clearly the three new sectors are engines of growth," she said, adding that it is directly related to the export markets.

Since last year, electric vehicles, lithium batteries and solar cells have become China's new export pillars, with their value exceeding 1 trillion yuan (US$138 billion).

"How [are the Chinese officials] going to react to Yellen's request to stop overproducing?" added Garcia-Herrero.

"I think they're going to hit the wall on this one."

Wang Zichen, a research fellow at the Beijing-based Centre for China and Globalisation think tank, said Yellen could find some common ground on the issue of global financial stability.

However, Wang warned there are "many more landmines" buried in the trade relationship, citing US concerns over alleged ties with China in the acquisition of the Pittsburgh-based US Steel by Japanese steelmaker Nippon Steel.

"[It] demonstrates the dire business atmosphere Chinese companies are facing in the US," he said, adding other examples, including US export controls over China and the "displeasure" shown by former president Donald Trump with Chinese products.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2024 South China Morning Post Publishers Ltd. All rights reserved.

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