Mariano Caucino

Yellen´s China Trip and the Limits of Interdependence

[Mark Schiefelbein/AP Photo]
[Mark Schiefelbein/AP Photo]

US Treasury Secretary Janet Yellen visit to the People´s Republic of China on July 7-9 marked the second trip made by a member of President Joe Biden’s cabinet to Beijing in less than a month. Yellen´s traveled for high-level meetings with her Chinese counterparts as part of the Biden Administration attempt for relaxing the US-China complex relationship.

A few weeks ago, on a trip indicated as the beginning of a “thaw”, Secretary of State Antony Blinken made a visit to the Chinese capital where he held meetings with President Xi Jinping and top heads of CCP diplomacy.

The Treasury Secretary conferred with the Chinese economic policy elite, led by Prime Minister Li Qiang, People’s Bank head Pan Gongsheng, Finance Minister Liu Kun and Vice Premier He Lifeng. The last visit by a Treasury secretary had taken place in 2019, when Steven Munchin was received by Xi himself.

Yellen said her journey was aimed at establishing and deepening ties with China’s new economic team, reducing the risk of misunderstanding and paving the way for cooperation in key areas such as climate change and debt.

Yellen’s trip sought to rebuild the dialogue between the highest authorities of the two world largest economies. Those that combined explain more than a third of the global gross product. On Sunday the 9th, in statements to CBS, the official assured that her purpose was to ensure that both powers were not trapped in a series of escalating actions designed to harm both equally.

Meanwhile, the Global Times -the CCP´s official organ- celebrated Yellen´s visit, noting that it implied a “positive sign for the world” by recalling that global financial health requires a conversation and a cooperative scheme between Washington and Beijing. The Party daily took an optimistic tone by quoting Premier Li Qiang’s words about “the appearance of a rainbow after the rains and winds” in the Sino-US ties.

Meanwhile, according to the Financial Times, throughout her visit, Yellen touched on the potential of ongoing trade and economic cooperation, highlighting Washington’s desire to stabilize the relationship, even as  China finds it more difficult to obtain US technology.

Yellen argued that the Biden Administration is considering a mechanism to reduce the risk of US investment helping China’s military and stressed that investment selection would be very targeted in a limited way to a few sectors where there are specific national security concerns.  Over the course of her visit, Yellen reiterated that it was important to have a high-level engagement between Washington and Beijing despite strategic rivalry.

As is well known, China and the United States keep endless disputes on sensitive matters and stand on opposite sides on issues such as the war in Ukraine, the Taiwan status, the irritating question of Human Rights, the accusations about the progress in telecommunications, Hong Kong and trade. Before returning to Washington, the envoy demanded “an end to Russia’s brutal and illegal war against Ukraine” and reiterated that it is essential that Chinese companies avoid providing Moscow with material support or assistance in order to avoid sanctions.

The Financial Times recalled that Yellen’s visit came amid a “disappointing” post-COVID economic recovery by Chinese standards. And warned that while the Politburo chiefs expect a GDP growth of five percent by 2023, economists fear that some underlying growth engines, such as the real estate sector, are heralding the arrival of a prolonged recession.

Since the beginning of relations in 1972 and their full normalization in 1979, the US and China have been developing a decisive economic and commercial link that largely explains today´s world realities. To the point that many respected analysts state that economic interrelation has acquired such a magnitude that it imposes a limit on the eventual spiraling of conflicts that separate Washington and Beijing on a geopolitical level.

On the other hand, another observer pointed out that -paradoxically- while the commercial flow between both powers reaches the highest records, the political relationship descends to its lowest extremes. A reality that limits the optimistic vision of those who adhere to the theory derived from the benefits of interrelation.

At this point it might be useful to remember that at the end of his life, in an almost forgotten book entitled “Victory Without War” (1988), Richard M. Nixon warned that while trade often helps to improve relations between states, it does not prevent war. Elevated to the status of “Elder Statesman”, the former president -himself the author of the opening to China in the early 1970s- suggested world leaders not to delude themselves with the myth that trade alone will bring peace. Remembering, for example, how highly interrelated nations murdered one another in terms of millions of lives during World War I and World War II.

In short, Nixon taught that economic relations can never be understood as a substitute for deterrence. Words that seem to remain valid in today’s world, when the West faces -for the first time in the last five hundred years- the rise of a non-Western power in a position to challenge its leadership.

Mariano A. Caucino is a foreign policy analyst. He served as Argentine Ambassador to Costa Rica and the State of Israel.  

About the Author
Mariano Caucino was Argentine ambassador to Israel (2018-2019) and to Costa Rica (2016-2017).