Yellen affirms U.S.-China economic bonds, rejects decoupling

In a significant move aimed at reinforcing economic ties between the world's two largest economies, U.S. Treasury Secretary Janet Yellen has reiterated the U.S.' commitment to maintaining a robust economic relationship with China, explicitly stating that the U.S. does not seek to decouple from China.

This statement came during Yellen's press conference in Beijing on Monday, marking her second visit to China in less than a year. 

Following Yellen's remarks, China's Ministry of Finance issued a statement welcoming the U.S. position against decoupling and called for an end to the sanctions and restrictions targeting Chinese firms, highlighting a mutual interest in maintaining open economic channels.

Both nations reaffirmed their November commitments to strengthen communication, prevent decoupling, and address mutual challenges. 

New agreements were reached to foster balanced economic growth, as announced by the ministry. Key areas of cooperation include financial stability, sustainable finance, and combating money laundering, within the framework of the financial working groups.

A noteworthy outcome from the discussions is the launch of the Joint Treasury-PBOC Cooperation and Exchange on Anti-Money Laundering, a new initiative aimed at bolstering efforts against illicit financial activities.

During the meetings, Chinese officials provided an overview of the country's economic landscape and policy directions, highlighting that its economy has maintained healthy and sustainable growth. The ministry underscored China's continued commitment to its fundamental policies of reform and opening up.

However, Yellen voiced concerns over certain aspects of the Chinese economy, particularly "overcapacity" in emerging industries such as electric vehicles, lithium-ion batteries, and solar energy.

"China is now simply too large for the rest of the world to absorb this enormous capacity," she stated, pointing to the potential global spillover effects.

The ministry responded to the concerns about "overcapacity" in the economy, describing it as a natural outcome of market forces. According to the ministry, the concept of supply and demand balance is not fixed, with fluctuations being a common occurrence.

Amid growing enthusiasm for the development of emerging industries across various regions, the Chinese government plans to step up its coordination and oversight at a national level, ensuring adherence to market economy norms.

The ministry also expressed China's strong objection to the increasing trend of "over-securitization" and green protectionist policies by certain developed nations. These measures, it argued, are not only self-defeating but also significantly encroach upon the legitimate development rights of Chinese firms.

Regarding the next steps, the working-level teams will continue to implement the consensus reached under the Economic and Financial Working Groups, said the ministry.

The fourth sessions of these groups are provisionally set to coincide with the World Bank/International Monetary Fund Spring Meetings, expected to take place in mid-April in Washington, D.C.