The Ministry of Finance in China has confirmed that US Treasury Secretary Janet Yellen will embark on a visit to China from July 6 to 9, following an agreement between the United States and China. This visit comes shortly after Secretary of State Antony Blinken’s recent trip to Beijing, which experts believe has created an opportunity for constructive engagements between the two nations. It also aligns with the United States’ efforts to navigate economic challenges, including the avoidance of a recession and inflation control.
During her visit, Secretary Yellen intends to engage in discussions on the responsible management of the relationship between the world’s two largest economies and address global challenges through direct communication. This objective reflects her acknowledgment, expressed during a meeting with business leaders of the US-China Business Council’s Board of Directors in June, of the significance of trade and investment between the two countries given their deeply intertwined economies.
Secretary Yellen has consistently emphasized the desire for a healthy economic relationship with China that promotes mutually beneficial growth, innovation, and expanded economic opportunities for both American workers and businesses. Collaboration on urgent global issues, such as climate change and debt distress, is also a key aspect of this vision, as highlighted in her previous speeches.
Chinese experts have commented on Yellen’s upcoming visit, suggesting that she may address fiscal and financial concerns between the two nations against the backdrop of improving tensions. One major objective for Secretary Yellen could be persuading China to refrain from reducing its holdings of US Treasury bonds and potentially increasing them at the appropriate time to assist the US in addressing inflation issues. Data released by the US Treasury on June 16 revealed that China reduced its holdings of US Treasuries by $400 million to $868.9 billion in April due to increasing default risks.
As the size of US Treasury bonds exceeds $32 trillion, reaching $32.039 trillion, according to updated information on the US Treasury website, experts believe that China’s continued investment in US Treasury bonds would alleviate financial pressure on the US. Additionally, Chinese experts have suggested that the US may consider lowering tariffs on China, which could yield economic benefits for both countries.
Wang Jisi, the president of the Institute of International and Strategic Studies of Peking University, highlighted the importance of addressing issues such as the depreciation of the Chinese yuan against the US dollar, China’s holdings of US debt, and inflation for both governments and financial sectors. The success of the negotiations will depend on whether the United States can translate its words into actions, which will play a pivotal role in determining the effectiveness and continuity of future cooperation between the two countries, according to economist Tian Yun.
Federal Reserve Chairman Jerome Powell’s recent statement that US domestic inflation is unlikely to reach the Federal Reserve’s two percent target until at least 2025 indicates an ongoing fight against inflation. Economists believe that eventual rate increases could potentially lead the US into a mild recession.
Overall, the outcome of Secretary Yellen’s visit and the subsequent cooperation between the United States and China will hinge on the United States’ ability to follow through on its commitments, which will be vital in building trust and facilitating effective implementation.