Officials from the US and China will meet to discuss economy, in an effort to reduce tensions
ZURICH (AP) — U.S. Treasury Secretary Janet Yellen sits down with her Chinese counterpart Wednesday in the highest-ranking contact between the two countries since their presidents agreed to look for ways to improve relations that have grown increasingly strained in recent years.
Yellen and Vice Premier Liu He meet for the first-ever face-to-face encounter. This is as the U.S. economy and China grapple with different but interconnected challenges in trade, technology, and more.
After a COVID-19 revival, the Chinese economy is now reopening killed tens of thousands many businesses and displaced thousands of people. Slowly, the U.S. is recovering. 40-year high price inflation And is on track for its success statutory debt ceilingThis would set up a likely political showdown between Republicans and Democrats in Congress. Asia is particularly interested in the debt issue, since China is the second largest holder of U.S. government debt.
There is also the Russian invasion of Ukraine, which continues to hinder global economic growth — and has prompted the U.S. and its allies to agree on an oil price cap on Russia in retaliation, putting China in a difficult spot as a friend and economic ally of Russia.
High interest rates worldwide have put pressure on countries that are heavily indebted to China, which has increased their debt burden.
“A wrong policy move or a reversal in the positive data and we could see the global economy head into a recession in 2023,” said Josh Lipsky, senior director of the Atlantic Council’s GeoEconomics Center. “Both countries have a shared interest in avoiding that scenario.”
The World Bank reported last week that the global economy will come “ perilously close ” to a recession this year, led by weaker growth in all the world’s top economies — including the U.S. and China. According to the report, superpowers’ economic downturns are likely to affect low-income countries.
“High on the list is debt restructuring,” Lipsky said of Wednesday’s talks. Many countries with low income are at risk of defaulting on debt in 2023. Many of these countries owe significant amounts to China.
“Leaders have been trying for two years to get some agreement and avoid a wave of defaults but there’s been little success and one reason is China’s hesitancy. I expect Yellen to press Liu He on this in the meeting,” Lipsky said.
Liu laid out an optimistic vision for the world’s second-largest economy in an address Tuesday at the World Economic Forum in Davos, Switzerland.
“If we work hard enough, we are confident that in 2023, China’s growth will most likely return to its normal trend. The Chinese economy will see a significant improvement,” he said.
After her stop in Switzerland, Yellen will travel to Zambia, Senegal and South Africa This week’s visit will be the first of a series of sub-Saharan Africa visits by officials from the Biden administration.
China is Zambia’s biggest creditor and it is currently renegotiating its debt of nearly $6 billion. During a closed-door meeting at the Africa Leaders Summit in Washington in December, Yellen and Zambian President Hakainde Hichilema discussed “the need to address debt sustainability and the imperative to conclude a debt treatment for Zambia,” according to Yellen.
The Zurich talks are a follow-up to the November meeting between President Joe Biden and China’s Xi Jinping on the sidelines of the Group of 20 summit in Bali, Indonesia. Both world leaders agreed that key senior officials would be empowered to work together on areas such as climate change mitigation and global financial, health, and food stability. Beijing had cut off such contacts with the U.S. in protest of then-House Speaker Nancy Pelosi’s trip to Taiwan in August.
“We’re going to compete vigorously. But I’m not looking for conflict,” Biden said at the time.
Antony Blinken (U.S. Secretaryof State) will be visiting China in February.
Among the economic problems is the fact that the Biden administration stopped the sale of advanced computers chips to China. It also considered banning investments in Chinese tech companies. This may be a way for Xi to undermine a key economic goal he set for his country. Tensions have been heightened by statements made by the Democratic president that America would defend Taiwan from a Chinese invasion.
Despite the fact that the U.S. Congress remains divided on many issues last week, House members agreed to continue to scrutinize Chinese investments.
New House Speaker Kevin McCarthy of California has identified the Communist Party of China as one of two “longterm challenges” for the House, along with the national debt.
“There is bipartisan consensus that the era of trusting Communist China is over,” McCarthy said from the House floor last week when the House voted 365 to 65 — with 146 Democrats joining Republicans — to establish the House Select Committee on China.
The U.S. Commerce Department published its annual report last year added dozens of Chinese high-tech companiesThe blacklist was created to protect national security, U.S. interests, and human rights and includes all manufacturers of aircraft equipment, chemicals, and computer chips. The Chinese filed a lawsuit against the World Trade Organization after that move.
Yellen is critical China’s trade policies and its relationship to Russia are examples of China’s growing economic ties with Russia since the outbreak of the conflict in Ukraine. On a July call with Liu, Yellen talked “frankly” about the impact of the Russia’s invasion of Ukraine on the global economy and “unfair, non-market” economic practices, according to a U.S. recap of the call.