On the afternoon of July 6, 2023, U.S. Treasury Secretary Janet Yellen arrived in Beijing, marking the beginning of her visit to China from July 6 to 9, just weeks after State Antony Blinken's trip last month.
Over the past five years, U.S.-China relations have steadily deteriorated, reaching their lowest point since the establishment of diplomatic ties in 1979. In early 2018, the U.S. shifted its national security strategy, designating China as its primary competitor with the most considerable impact on national security. This set the stage for the strategic competition framework between the two countries. However, when the world's two largest economies engage in fierce geopolitical rivalry, global security is greatly compromised.
Given this backdrop, Yellen's visit to China carries great significance. From a market perspective, the top economic officials of both countries have finally come together at the negotiating table in Beijing. They will discuss a wide range of issues, spanning bilateral, multilateral, and global matters, including tariffs, investment, semiconductors, global debt, climate change, and the Ukraine crisis. This positive development is noteworthy, as the stabilization of bilateral relations is welcomed news for the world. Notably, upon Yellen's arrival, she appeared to be warmly welcomed by Chinese finance ministry official Yang Yingming, and their interaction hints at a potentially smooth journey for Yellen during her visit.
In April of this year, Yellen publicly expressed that a complete separation of the U.S.-China economies would be catastrophic for both countries. She emphasized the need to "cut through the noise and speak to this essential relationship based on sober realities". The U.S. Embassy in China stated in a press release that Yellen's goals for her visit include seeking to establish a healthy economic relationship with China, promoting mutually beneficial growth and innovation, and expanding economic opportunities for American workers and businesses.
Analysts point out that this is Yellen's first visit to China as the Secretary of the Treasury, and she is known for her rational and pragmatic approach. If Secretary of State Antony Blinken's visit in June was considered an ice-breaking trip in recent years, then Yellen's visit as a heavyweight official responsible for economic affairs in the Biden administration is expected to effectively repair the long-standing interruption in high-level economic exchanges between the two countries. Despite the intense geopolitical competition and the recurring discussion of "decoupling", the bilateral trade volume between the two countries indicates that they are deeply intertwined in economic and trade relations. According to U.S. data, the total goods trade between the U.S. and China reached a record USD 690.6 billion in 2022, while Chinese statistics indicate an even larger scale, with bilateral trade exceeding USD 750 billion in the same year.
In the midst of the highly turbulent international landscape, where anti-globalization sentiments converge with geopolitical conflicts, the world market space has fragmented, ushering in a phase of counter-currents in the course of historical development. However, taking a broader perspective, we maintain that globalization will still exert a significant influence, albeit with notable variations, as the prevailing force driving global progress. The trajectory of global dynamics, encompassing economics, and geopolitics, can be likened to a pendulum. We are currently witnessing the pendulum swings toward escalating geopolitical competition rooted in ideology, values, and economic interests. For China, the international landscape has suddenly become exceptionally precarious.
Adopting a long-term perspective allows us to envision a future of smooth development, even amidst pessimistic circumstances. Although the world currently experiences the swing of the pendulum from the favorable era of globalization to its opposite extreme, it's important to recognize that these extreme phases are relatively short-lived. More likely, over an extended period, the world will settle into a state of relative equilibrium between the two extremes.
The dynamics of U.S.-China relations also follow the pendulum model, where the overall state of relations may temporarily reach a low point but will not remain in perpetual deterioration. Instead, we are now witnessing a shift towards a more balanced middle ground. As long as there are no crises in the Taiwan Strait or full-scale military conflicts, the chances of further escalation are minimal. Consequently, the global situation should naturally swing back from the extreme. Additionally, relations between China and countries like Australia and New Zealand have shown signs of improvement since the beginning of this year. Visits by leaders from the European Union, Germany, and France to China further highlight their aspirations for pragmatic cooperation.
Globalization continues to serve as the long-term mainstream of global development, and upholding openness remains a long-term principle that China must adhere to. Strategically, it should employ openness as a response to containment efforts by the U.S. and its allies, through seeking exchanges, communication, and integration with the world across diverse domains. Establishing a situation where mutual interdependence exists between China and the world renders the decoupling strategy difficult to implement.
To effectively implement this strategy, careful top-level planning is of paramount importance. Within China's high-level decision-making processes, a delicate balance must be struck between the strategy of promoting external openness and the prevailing geopolitical landscape. While China may be employing specific countermeasures at the micro level to address sanctions and containment efforts, it is essential to uphold the broader strategic principles of reform, openness, and globalization.
Final analysis conclusion:
Throughout history, the world has experienced cycles of unity and division, a pattern that holds true in the current era characterized by resurging anti-globalization sentiments and geopolitical tensions. Despite these challenges, it is important to recognize that globalization continues to be the prevailing trend in the long term. In this context, China should embrace a long-term perspective and uphold the principles of globalization, emphasizing the significance of reform and opening up. By doing so, it can effectively navigate the fluctuations of the global landscape and be prepared for the eventual swing of the pendulum from extremity back to equilibrium.
