US Treasury Department officials visit Beijing for economic talks

The Biden administration will send a high-level delegation of Treasury Department officials to Beijing this week for economic talks, as the world’s largest economies seek to continue engagement efforts that President Biden and Chinese President Xi Jinping agreed to pursue last year. do. .

A Treasury official, speaking on condition of anonymity because the trip is not public, said the two-day meeting would include “candid conversations” about China’s use of non-market economic practices such as government subsidies. . U.S. officials will also discuss concerns about overcapacity in the industry, which could flood international markets with cheap products.

The two leaders will also discuss ways to resolve the sovereign debt burden that weighs heavily on low-income countries and prevents some from investing in sustainable development and climate action. China is one of the world’s biggest creditors and faces international pressure for concessions that would enable a global effort to restructure hundreds of billions of dollars in debt owed by poor countries.

More broadly, the two governments will discuss their countries’ macroeconomic outlooks, whose economies are critical to the overall health of the global economy. The United States is proving to be the most resilient economy in the world. Meanwhile, China continues to be plagued by crises in its financial industry, a volatile stock market, and a real estate sector struggling to rein in massive local government debt.

The International Monetary Fund last week predicted in its latest economic outlook that China’s economy would grow at a rate of 4.6% in 2024, faster than previously expected. However, he also called on China to carry out long-term structural reforms to its economy, including reviewing its pension system and reforming state-owned enterprises, to prevent a further significant slowdown in production.

“Without these reforms, China’s growth rate risks falling below 4%,” IMF Managing Director Kristalina Georgieva told reporters on Thursday.

U.S. and Chinese officials will also discuss mutual efforts to combat climate change and the mechanics of investment review programs that are creating new economic barriers between the two countries.

The purpose of restoring a formal economic dialogue structure is to prevent misunderstandings between the United States and China from escalating into an economic war.

The five-member Treasury Department group will be led by Jay Shambaugh, the department’s undersecretary for international affairs. This is the first time that the Economic Working Group, established in September last year, has met in Beijing. In January, a group of Treasury officials focused on financial issues met in Beijing.

The trip could pave the way for a second trip to China by Treasury Secretary Janet L. Yellen, who visited Beijing last summer.

The Biden administration is trying to convince Chinese officials that President Biden’s efforts to diversify U.S. supply chains away from China are not intended to undermine China’s economic development.

Treasury officials did not elaborate on what specific concerns Shambaugh would raise with Treasury officials during his visit. But Biden administration officials have continued to complain in recent months about China’s subsidies to domestic industries and discrimination against foreign competitors.

In a speech to the U.S.-China Business Council in December, Yellen lamented that China continues to use unfair economic practices, restrict access to foreign companies and put pressure on American companies.

“For too long, American workers and businesses have not been able to compete on a level playing field with Chinese workers and businesses,” Yellen said.

Although the increased level of engagement appears to have eased some of the public tensions between the United States and China, it is unclear how much progress will actually be made.

Last August, the Biden administration moved ahead with plans to introduce new rules that would limit U.S. investment in certain areas of China that the U.S. considers to be a national security risk. Two months later, China announced it would restrict exports of graphite, a key component in electric vehicle batteries.

However, both countries say they want to continue exploring areas of cooperation.

Eswar Prasad, a professor at Cornell University and former head of the International Monetary Fund’s China division, said, “These trips are critical to preventing further escalation of hostilities, especially as election year rhetoric intensifies in the United States.” ” “I think both sides are very keen to quell further escalation of hostilities.”