The United States and China are both leading and competing global powers. Both states have seen trade competition in the last few years. The successive US administrations, from Barack Obama to Joe Biden, have pressured the Chinese government to undertake unified trade and tariff policies. Additionally, the US has been accusing the Chinese government of using illegitimate means to compete with Washington on the global stage.

In the midst of escalating tensions between the United States and China, US Treasury Secretary Janet Yellen embarked on her second trip to China on April 4th. This visit comes after a recent phone call between US President Joe Biden and Chinese leader Xi Jinping, reflecting efforts to bolster communication channels amid Washington’s heightened restrictions on high-tech exports to China and concerns over industrial overcapacity.

During her initial meetings in Guangzhou on April 5th, Yellen’s discussions centered on addressing the surplus of Chinese goods in critical sectors such as electric vehicles (EVs) and solar panels.

This issue has emerged as a significant point of contention globally and in the lead-up to November’s upcoming US presidential election.

The significance of Yellen’s visit lies in the Biden administration’s commitment to engaging with Beijing on economic and trade issues. The discussions aim to address what the administration perceives as “unfair” trade practices by China, particularly regarding industrial overcapacity. Yellen has expressed openness to exploring additional measures to safeguard American clean energy sectors from Chinese competition, highlighting the importance of strengthening economic ties between the world’s two largest economies.

Amidst these discussions, the International Monetary Fund’s projections forecast a 4.6 percent growth in China’s real gross domestic product (GDP) for 2024, with a slight decrease to 4.1 percent in 2025. Yellen’s approach to potential trade barriers with China emphasizes exploring diverse strategies, including tax subsidies, to protect critical sectors without explicitly mentioning tariffs. This strategy aligns with previous assertions regarding China’s subsidies in clean energy and industrial capacities, which have impacted the competitiveness of workers and businesses globally.

Furthermore, Yellen’s discussions prioritize stabilizing the global economy and addressing China’s support of Russia during the Ukraine invasion. Tensions escalated following President Biden’s characterization of Xi as a dictator, leading to protests from the Chinese government.

The strained relations were further exacerbated by a Chinese surveillance balloon incident in February, which crossed into US airspace and was subsequently downed.

Recent efforts to improve bilateral relations indicate a US approach focused on fostering “healthy” relations with China rather than advocating for economic decoupling. The emphasis is on collaboration on pressing issues such as climate change and debt distress, highlighting the importance of constructive engagement between the two nations.

In contrast, Chinese President Xi Jinping has introduced the concept of “new productive forces,” emphasizing the need for a novel economic growth paradigm driven by technological innovation. While this focus on high-tech sectors holds the potential for economic expansion and technological advancement, it also raises concerns about exacerbating existing disparities and income inequality without accompanying measures to stimulate domestic consumption.

Addressing these challenges requires implementing policies encouraging domestic consumption, supporting inclusive growth, and fostering entrepreneurship and innovation across various sectors.

Striking a balance between promoting new productive forces and supporting domestic consumption is essential to harnessing the full potential of technological innovation for broader economic development.

Despite recent diplomatic efforts, significant challenges persist in US-China relations, including concerns over China’s support for Russia in the Ukraine conflict and regional security issues such as Taiwan’s status. Effective management of differences and ongoing dialogue and cooperation are essential to navigating the complexities and uncertainties in the bilateral relationship.

Finally, while Janet Yellen’s visit to China marks a critical step in strengthening diplomatic and economic ties between the United States and China, it does not signify a significant easing of tensions or resolving longstanding disputes. Continued dialogue, cooperation, and effective management of differences are essential for improving relations and addressing shared challenges in the years ahead.