Yellen Calls for China to Transition Away from State-Driven Economic Practices Deemed ‘Unfair

In a recent address, US Treasury Secretary Janet Yellen urged China to reconsider its state-centric economic model, which she believes is deterring investors. She highlighted the dominance of state-owned enterprises and the extensive influence of China’s security apparatus as major impediments to economic growth and investment. 

American businesses have expressed grievances over the business climate in China, citing inadequate intellectual property safeguards and a bias towards domestic companies. These concerns have been exacerbated by increased scrutiny of US consulting firms in China. Consequently, the US is advocating for a more stable business atmosphere that would ensure equitable competition.

Yellen referred to a US-China Business Council survey indicating that more companies are contemplating relocating some of their operations from China than in any previous year since 2016, suggesting that Beijing should take this as a cue to initiate structural reforms. 

The ongoing imbalance in competitive conditions has been a longstanding challenge for American companies and workers. The Treasury Secretary accused China of engaging in a range of inequitable practices that create hurdles for foreign firms, including American ones. 

She also discussed the broader US-China economic relationship, acknowledging the complexities and the inevitability of disagreements between the two global powers. However, Yellen emphasized the importance of resilient communication to prevent these differences from escalating.

As both nations have attempted to stabilize their relations amid heightened tensions over various issues, high-level exchanges have taken place, including visits by US officials and a summit between President Joe Biden and Chinese President Xi Jinping. These interactions underscore a mutual expectation to collaborate on global concerns like climate change.

In her forthcoming visit to China as head of the Treasury, Yellen plans to address contentious topics, stressing the US’s stance on maintaining transparent dialogues on issues such as investment restrictions and national security. She also indicated the necessity of understanding China’s policy responses to economic challenges, such as local government debt and the real estate sector, which are vital for informed US policymaking.

The US intends to push for greater clarity on China’s economic policies and non-market practices, advocating for more open exchanges between financial regulators and enhanced cooperation on environmental issues.