China’s export curbs on raw materials are concerning, Yellen says on Beijing trip

By Jennifer Hansler and Juliana Liu, CNN

Beijing/Hong Kong (CNN) — Beijing’s newly unveiled export controls on two strategic raw materials critical to the global chipmaking industry are a “concern,” US Treasury Secretary Janet Yellen said on the first day of her trip to China, where she met the country’s premier in an effort to stabilize bilateral relations after a particularly difficult period.

On Monday, China imposed curbs on overseas sales of gallium and germanium, elements essential to making semiconductors, which have become a growing source of friction between the world’s top two economies.

The move was widely seen as a response to the Biden administration’s ban on advanced chip sales to China, which was announced last October.

“I am … concerned about new export controls recently announced by China on two critical minerals used in technologies like semiconductors,” Yellen told a meeting of business people hosted by the American Chamber of Commerce in Beijing.

“We are still evaluating the impact of these actions, but they remind us of the importance of building resilient and diversified supply chains,” said Yellen.

She told the executives that she will be bringing up in meetings with her counterparts other concerns from the US business community, including China’s use of “non-market tools” like expanded subsidies for its state-owned enterprises and domestic firms, as well as what some call barriers to market access for foreign firms.

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

She did not elaborate. But since late last year, Chinese authorities have been cracking down on Western consulting and due diligence firms such as Bain & Company and the Mintz Group.

Officials have accused Capvision, an expert network based in Shanghai and New York, of helping to leak sensitive military information to foreign forces.

Yellen’s trip, which ends on Sunday, comes just weeks after US Secretary of State Antony Blinken visited Beiing in his first trip as part of the Biden administration.

He was the first American secretary of state to visit China in five years, and his meetings with senior officials were seen as a key test for whether the two governments could stop relations from continuing to plummet.

Healthy competition

Yellen sought to play the peacemaker during her meeting with Premier Li Qiang, a trusted long-time ally of leader Xi Jinping.

She said Washington sought healthy economic competition, with a fair set of rules, that was not winner-takes-all.

“The United States will, in certain circumstances, need to pursue targeted actions to protect its national security. And we may disagree in these instances,” she said.

“However, we should not allow any disagreement to lead to misunderstandings that needlessly worsen our bilateral economic and financial relationship.”

Li Qiang said her visit had “drawn the world’s attention” and that people may have high expectations as she was only the second US cabinet official to visit China after Blinken in recent years.

The premier likened the US-China relationship to a rainbow that was seen in Beijing on Thursday when Yellen landed, saying that while there may be “wind and rain” — a euphemism for hardship — there will always be hope in the sky.

Meeting friends

Earlier on Friday, Yellen met Liu He, a former vice premier and previously her Chinese counterpart, in what has been called “a meeting of old friends.” She also met Yi Gang, governor of China’s central bank.

A US Treasury official called the discussions “informal and substantive,” adding that they discussed the global economic outlook as well as the respective economic outlooks for the United States and China.”

Yellen’s trip follows US President Joe Biden’s directive after his meeting with Chinese leader Xi Jiping last November to deepen communication between the US and China on a range of issues, including on the global macroeconomy and financial developments, the Treasury Department said in a statement on Sunday.

In testimony before Congress in April, Yellen stressed the importance of maintaining ties with China and said that “decoupling would be a big mistake,” though she noted that alleged human rights abuses in China and questionable trade policies must be “addressed.”

In June, she told a group of top American CEOs that it is critical for the US to work with China on specific and urgent global challenges.

— CNN’s Wayne Change contributed reporting.

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