US-China’s prospective economic realignment: a critical analysis

By Mehmood-Ul-Hassan Khan | Gwadar Pro Jun 29, 2023

Editor's Note: The author is Executive Director of the Center for South Asia & International Studies (CSAIS) Islamabad and Regional Expert on China, BRI & CPEC. The article reflects the author's opinions and not necessarily the views of Gwadar Pro.

It seems that the US-China economic ties are now getting momentum. Now US Treasury Secretary Janet Yellen while delivering a speech in Paris on easing poor countries' debt and unlocking climate financing expected that both countries should jointly work.

In this regard, Yellen is reportedly planning to visit China in July. It estimates that she would discuss prospects of the revival of official economic engagement between the two countries. Arguably, the US macro-economy is passing through a difficult time because of the increasing debt ceiling, high inflation, high interest rate, price hike, contagious domestic banking industry crisis, and last but not least weak economic and industrial pace.

Even its self-imposed and unilateral trade embargos, technological sanctions, and economic hurdles against China are also proving self-destructive. So, Washington needs to make sincere moves rather than create new troubles.

Moreover, according to Bloomberg, Yellen’s prospective visit to Beijing in early July indicates the US economic emergency which urgently requires immediate strengthening, streamlining, and systematizing of trade and economic ties with China, the world's second-largest economy and hub of global supply chains.   

However, hawks sitting in the Biden administration intentionally push for an executive order that would regulate and potentially cut off certain US investments in China which would further deteriorate bilateral relations with China.

Critical analysis establishes that Trump-era tariff rates are hurting American consumers badly and the US has been facing high inflation and growing debt ceiling problems which would fizzle out after Yellen's visit to Beijing.

Yellen while appearing before the Congress testimony also called for a healthy economic relationship with China.  Moreover, she termed de-coupling with China as a big mistake but subsequently changed her stance by saying national security comes first.

In this connection, the Chinese Foreign Ministry did not confirm this reported visit. But Mao Ning, spokesperson of the ministry, said that "China and the US are in touch about dialogue and exchange at various levels.

Obviously, after raising the debt ceiling, the US needs finding buyers for the debt. Additionally, there may be discussions around debt repayments for developing countries, which cannot be solved without China's involvement. Yellen's visit may yield some positive results in the economic field if the Biden administration will change its major containment strategy toward China.

Despite Blinken’s recent visit to Beijing, the US has not yet stopped provoking troubles such as the fentanyl issue, hype over a Chinese spy base in Cuba, and even a false and fake attack on the Chinese leader, all overshadowing already complex bilateral ties. Hopefully, Yellen would not behave like those US officials in charge of diplomacy and security who understand little or nothing about China's economy.

Most importantly, Wang Yi, director of the Office of the Foreign Affairs Commission of the Communist Party of China (CPC) Central Committee met the National Committee on US-China Relations chair Jacob Lew, indicating China’s strong commitment to resolve pending issues with the US. However, the roots of the difficulties facing China-US relations lie in the US' severe deviation in its position on China, which lead to a series of misguided measures against China. 

In summary, although the official communication channel has been reopened after the recent visit of Blinken to Beijing, it remains uncertain whether this channel could help fix any of the problems between the two sides because the US insists on rivalry and confrontation with China. The proposed visit of Yellen would open a window of opportunity between both countries which should not be wasted.

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