Yellen criticises Chinese treatment of US companies during visit to revive relations

"I am communicating the concerns that I’ve heard from the US business community  including China’s use of non-market tools like expanded subsidies for its state-owned enterprises and domestic firms, and barriers to market access for foreign firms," Yellen said.

US-Chinese relations are at their lowest level in decades due to disputes over technology, security, Beijing’s military expansion and other irritants.

On Friday, Yellen met with the outgoing governor of China’s central bank, Yi Gang, and former Vice Premier Liu He, previously her counterpart in finance talks, according to the Treasury.

She was due to meet later with China’s No 2 leader, Premier Li Qiang.

Treasury officials said earlier Yellen wouldn’t meet with Chinese leader Xi Jinping. They said no breakthroughs on major disputes were expected.

The Chinese finance ministry called Yellen’s visit a concrete measure toward carrying out an agreement by Xi and President Joe Biden during a meeting in November to improve relations.

It gave no indication of possible initiatives or compromises.

There will be no winners in trade wars or ’decoupling and broken chains,’ the ministry said in a statement.

We hope the United States will take concrete actions to create a favorable environment for the healthy development of economic and trade relations.

US and other foreign companies are uneasy about their status in China following raids on consulting firms, the expansion of a national security law and calls by Chinese leader Xi Jinping and other officials for greater self-sufficiency.

"I’ve been particularly troubled by punitive actions that have been taken against US firms in recent months," Yellen said.

China’s government has been frustrated by US curbs on access to advanced processor chips on security grounds. That threatens to delay or derail the ruling Communist Party’s efforts to develop telecoms, artificial intelligence and other technologies.

Xi accused Washington in March of trying to hamper China’s development. Beijing has been slow to retaliate, possibly to avoid disrupting its own tech industries. But this week, the government announced unspecified controls on exports of gallium and germanium, metals used in making semiconductors and solar panels.

That announcement jolted South Korea and other countries that import from China. Businesspeople have warned the world’s two biggest economies might split into separate markets with incompatible products as Beijing and Washington tighten trade controls and tell companies to reduce reliance on each other.

They say that will hurt economic growth and innovation. ”I have made clear that the United States does not seek a wholesale separation of our economies,” Yellen said.

A decoupling of the world’s two largest economies would be destabilising for the global economy, and it would be virtually impossible to undertake. Yellen defended US export curbs and rejected Chinese accusations that Washington uses them for economic advantage.

I also made clear that actions we take to protect our national security are designed to be narrowly targeted and that they are premised on straightforward national security considerations and not undertaken to gain economic advantage over China," Yellen said.

Yellen follows Secretary of State Antony Blinken, who met Xi last month in the highest-level US visit to Beijing in five years. The two agreed to stabilize relations but failed to agree on improving communications between their militaries.

Treasury officials told reporters earlier in Washington the secretary wanted to focus on stabilising the global economy and challenging Chinese support of Russia during its invasion of Ukraine.

The latest flare up came after President Joe Biden referred to Xi as a dictator. The Chinese government protested, but Biden said his blunt statements are just not something I’m going to change very much.

Ties became especially testy after a Chinese surveillance balloon flew over the United States in February and was subsequently shot down.

Biden’s climate envoy, John Kerry, is scheduled to become the next US official to visit China, next week, a State Department official confirmed Thursday.

China and the United States are the world’s No 1 and No 2 emitters of climate-changing carbon, making whatever steps they take critical. The trip will be Kerry’s first to China since it broke off climate discussions with the US in August in retaliation for then-House Speaker Nancy Pelosi’s travel to Taiwan.