Yellen Heads to China for Economic Talks Amid Escalating 'Chip War'

WASHINGTON (Sputnik) - US Treasury Secretary Janet Yellen will visit China from July 6-9 to meet with senior Chinese officials on an array of economic issues, as well as bolster ties between Washington and Beijing amid rising tensions over trade restrictions.

Yellen’s visit to China follows a visit to Beijing by US Secretary of State Antony Blinken last month - a trip that was postponed earlier this year after relations soured over the transit of an alleged Chinese surveillance balloon across the United States.

Although any goodwill built may have been undermined by President Joe Biden referring to Chinese President Xi Jinping as a "dictator" during a fundraiser a couple weeks ago.

US administration officials scrambled to do damage control and downplay the comment, lest it widen the differences between the two countries over several trade and security issues, including what several media outlets are now calling a "chip war."

Just a few days before Yellen's trip, China announced new export controls on gallium and germanium, rare earth elements used in microchips. Beijing's move has been seen as retaliation against US curbs on sales of Chinese high-tech products.

On Wednesday, Biden vowed to engage allies in response to China’s new limits.

However, according to former Chinese Vice Commerce Minister Wei Jianguo, Beijing has plenty of trade-related weapons to choose from if the US fires back.

"This is just the beginning," Wei told China Daily on Wednesday. "China's tool box has many more types of measures available."

Tall Order Despite Tempered Expectations

Yellen's trip to Beijing is part of Biden’s directive to deepen communication between the United States and China on a range of issues, including on global macroeconomy and financial developments, the Treasury Department said earlier this week.

Treasury officials and Yellen herself have tried to manage expectations - even before the trip was announced.

"My hope in traveling to China is to re-establish contact. There is a new group of leaders - we need to get to know one another," Yellen told US media last week.

Yellen also said a healthy economic relationship between the US and China is both desirable and possible.

The US official also reportedly seeks to meet her Chinese counterpart, Vice Premier for Economic Policy He Lifeng, during the trip. In March, He was appointed to the role, which requires him to oversee the country's economy.

Yellen is expected to highlight the importance of responsibly managing the relationship between the United States and China, as the world’s two largest economies, according to US officials.

On Monday, Yellen spoke with Chinese Ambassador to the US Xie Feng ahead of her trip to Beijing in what the Treasury Department described as a "frank and productive” discussion.

However, at the same time, Treasury officials have also said no major breakthroughs are expected as a result of Yellen's meetings in China. "We recognize that there are also significant disagreements that will not be resolved over the course of a single trip," a US Treasury official said, as quoted by media on Wednesday.

Saboteurs

Other issues of concern between the United States and China include currency manipulation, trade tariffs, as well as debt for developing countries - topics that could pop up during Yellen's meetings.

Despite hopes that Yellen's visit could improve relations with China, some US lawmakers are not pleased the Treasury chief is even making the trip.

Senator Marsha Blackburn in a tweet on Wednesday appeared to mock Yellen’s objective of engaging Chinese officials on how to “responsibly manage” the relationship.

"In order to take on China, we must pursue a policy of peace through strength, not peace through appeasement,” Blackburn said.

Although unlikely a topic on Yellen's agenda, security matters have significantly strained the relationship as well, such as the US approving weapons sales to Taiwan, cybersecurity and, apparently, an arms race.

US Rep. Mike Gallagher and Sen. Joni Ernst, in a conspicuously-timed op-ed published by US media on Wednesday, said new legislation is being introduced, called the “Through our Rings of Fire Act,” which will require the Pentagon to develop a strategy to counter China's missile advantages.