US Treasury Secretary, Janet Yellen, announces new rules for investments in China, focusing on national security and minimizing trade impact.
US Treasury Secretary, Janet Yellen, recently announced that the new rules from the Biden administration to limit US investment in China will not be overly detrimental to trade between the two countries. Instead, these rules will focus on national security concerns.
The forthcoming regulations, expected sometime this summer, will focus on critical areas of technology such as semiconductors, quantum computing, and artificial intelligence. Yellen has assured that these measures will have a “limited scope” and “will not be broad controls that would broadly affect US investment in China”. In her opinion, these rules will not fundamentally impact the investment climate for China.
These statements were made during an interview with Bloomberg Television, on the sidelines of a meeting of finance ministers from the world’s largest economies in Gandhinagar, India. Yellen explained that she had spoken with Chinese officials about the rules and said: “What I tried to explain to our Chinese counterparts is that our desire is to make these US policies clearly focused on national security, transparent and narrow, and not to try to stifle economic progress in China. We have, and want to continue to have, deep economic ties.”
In the backdrop of the discussion about US restrictions on foreign investment in China, there is increasing evidence that the Chinese economy is in trouble. Economic growth has slowed dramatically, and the yuan has lost value against other world currencies.
On Monday, official figures released by Beijing said the economy had grown only 0.8% from the end of the first quarter of 2023 to the end of the second quarter, a much lower rate than expected.
Also this week, the country’s troubled real estate conglomerate, Evergrande, revealed that in 2021 and 2022 it lost more than $81 billion and still has obligations worth $340 billion, including some $140 billion to raw material suppliers and many thousands of Chinese who paid in advance for houses that were never built.
In her comments on Monday, Yellen highlighted China’s difficulties and said there is some danger that the weakness of its economy could have an impact worldwide.
“China has seen slower growth than it expected as it opened from COVID. Consumer spending has been relatively weak. It seems that consumers are more focused on restoring their savings security, so growth has been slow when, as you know, youth unemployment is quite high there,” she noted.
In addition, she said she expects a slowdown in China to have only a small impact on the US.
“Countries depend on strong growth from China to promote the growth of their own economies, particularly Asian countries, and slow growth from China can have a negative indirect effect on the United States,” she said.
“Our growth has slowed, but the labor market remains quite strong and I do not expect a recession,” she concluded.
