As US Treasury Secretary Janet Yellen gears up Friday for two days of meetings with officials and economists in Beijing, she has a tough job: to stabilize a fractious relationship that worsened this week when China retaliated in a tech war with the United States.
On Monday, China announced restrictions on exports of two strategic materials needed to make semiconductors, which are crucial for the normal functioning of daily life and a growing source of tension between the world’s top two economies.
“This is just the beginning,” Wei Jianguo, a former Chinese vice-minister of commerce, told the official China Daily. “China’s tool box has many more types of measures available.”
The issues that need to be worked out between the superpowers are thorny and complex, even as their economies seem to defy talk of decoupling to become ever more intertwined.
Yellen’s visit comes at a moment when the global economy faces much uncertainty, as China’s post-Covid recovery loses momentum, Europe tries to pull out of a recession and the United States is still at risk of one.
The global economy stands to gain if Washington and Beijing can mend fences, but analysts say this appears unlikely.
“The two countries have misaligned and competing strategic interests. The relationship is at its lowest point in decades, marked by palpable and mutual distrust,” said Anna Ashton, director of China corporate affairs and US-China relations at Eurasia Group.
Here are four things likely to make it harder for Yellen to repair US-China ties, and one thing keeping the relationship going.
The tussle over the future of semiconductors has escalated in recent months, drawing in Japan and Europe. Beijing played a trump card earlier this week when it imposed export controls on two raw materials, gallium and germanium, that are