US seeks healthy economic ties with China but security remains top priority, Yellen says

Treasury Secretary says relations between Washington and Beijing are 'clearly at a tense moment'

Janet Yellen said the US and China have a responsibility to work together. Reuters

Treasury Secretary Janet Yellen on Wednesday said the US seeks a “healthy economic relationship” with China but added that national security remains the highest priority — even if it affects the economy.

Ms Yellen's remarks at Johns Hopkins University’s School of Advanced International Studies came a month after Chinese Foreign Minister Qin Gang accused Washington of inflaming tension between the two nations.

Her speech presented a more positive outlook for the US and China, as she called for the two economic powers to pursue a relationship that would allow them to jointly tackle global challenges such as climate change and debt burdens.

“Progress on these issues requires constructive engagement between the world’s two largest economies,” Ms Yellen said. “Yet our relationship is clearly at a tense moment.”

Relations between Washington and Beijing faltered after a surveillance balloon was spotted soaring over the contiguous US. Taiwan also remains a fraught issue.

Reiterating her faith in the long-term strength of the US economy, Ms Yellen said Washington remains firm in defending its values and national security.

“Within that context, we seek a constructive and fair economic relationship with China,” she said.

Ms Yellen also said that the US and China have a responsibility to work together.

“China and the United States can and need to find a way to live together and share in global prosperity,” she said.

“We can acknowledge our differences, defend our own interests and compete fairly.”

Tackling debt relief and climate change

The US Treasury Secretary said two major economic powers should collaborate on solutions for climate change and debt, but criticised Beijing for acting as a “roadblock” in the debt restructuring process.

“China’s participation is essential to meaningful debt relief,” she said. “But for too long, it has not moved in a comprehensive and timely manner.”

Ms Yellen said debt overhang in low- and middle-income countries such as Zambia has a negative effect on investment and development.

At the same time, she again welcomed China's involvement in helping Sri Lanka secure a bailout from the International Monetary Fund and called on Beijing's “full participation” for similar cases in Zambia and Ghana.

Ms Yellen said working on such cases is a “true test” of multilateralism.

She also noted that China and the US are the world's largest emitters of greenhouse gases.

The US expects China to deliver on commitments made at Cop26, including mitigation targets and ending the financing of coal-operated power plants overseas, she said.

National security remains top concern, even if it comes at a cost

Although she laid out a more positive road map for the two countries, Ms Yellen said national security and human rights remain the two highest priorities for the US.

“We will not compromise on these concerns, even when they force trade-offs with our economic interests,” she said.

The suspected Chinese spy balloon drifts to the ocean after being shot down off the US coast, as seen from South Carolina. Reuters

President Joe Biden congratulated fighter pilots for taking down the suspected spy balloon. AFP

The balloon seen from Holden Beach. Reuters

Spectators watch from the coast. Reuters

A jet flies by the balloon. Reuters

Another spectator watches after the balloon was shot down. Reuters

The suspected Chinese spy balloon over Billings, Montana. AFP

Ms Yellen scorned Beijing's “no limits” relationship with Russia and warned China not to help Moscow evade sanctions.

“The consequences of any violations would be severe,” she said.

Ms Yellen said the US “will not hesitate to defend our vital interests” and added that any actions undertaken by Washington are not designed to gain an economic advantage.

She said she hopes to visit China at “the appropriate time” to engage in substantive dialogue on economic issues.