President Joe Biden’s administration plans to “restrict certain U.S. outbound investments” in China on national security grounds, according to Treasury Secretary Janet Yellen.
“We have made clear that safeguarding certain technologies from the PRC’s military and security apparatus is of vital national interest,” Yellen said Thursday. “And we are considering a program to restrict certain U.S. outbound investments in specific sensitive technologies with significant national security implications.”
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U.S. officials have debated the contours of such a program for months as part of a wide-ranging consideration of how to maintain a technological advantage over the communist regime. Chinese officials have denounced those measures as a drive for economic “decoupling” intended “to contain and suppress China,” but Yellen denied that ambition while citing Beijing’s attempt to “undercut its neighbors and countries across the world” as a justification for such precautions.
“These national security actions are not designed for us to gain a competitive economic advantage or stifle China’s economic and technological modernization. Even though these policies may have economic impacts, they are driven by straightforward national security considerations. We will not compromise on these concerns, even when they force trade-offs with our economic interests,” the treasury secretary said at the Johns Hopkins School of Advanced International Studies.
(AP Photo/Manuel Balce Ceneta)
The dispute over the war in Ukraine has emerged as a new variable in that calculus. Chinese officials reportedly have avoided sending weapons to the Wagner Group, the mercenary force fighting on the front lines in eastern Ukraine, but Secretary of State Antony Blinken announced in February that Beijing was considering Russian requests for military aid.
“It is essential that China and other countries do not provide Russia with material support or assistance with sanctions evasion. We will continue to make the position of the United States extremely clear to Beijing and companies in its jurisdiction. The consequences of any violations would be severe,” Yellen said.
That specific threat came with the backing of the largest industrialized democracies, as she echoed a demand for “third parties to cease assistance to Russia’s war, or face severe costs” issued by the G-7 on Monday. That statement included a demand for China to “abstain from threats, coercion, intimidation, or the use of force” around Taiwan and in other territorial disputes, alongside an offer “to promote … mutually beneficial” economic cooperation with Beijing.
“It is in the interest of all countries, including China, to ensure transparent, predictable, and fair business environments,” the G-7 foreign ministers emphasized. “Legitimate business activities and interests of foreign companies must be protected from unfair, anti-competitive, and nonmarket practices, including through illegitimate technology transfer or data disclosure in exchange for market access.”
Yellen struck a similar note while outlining the Biden administration’s approach to economic ties with China in the midst of a fraught and acrimonious competition for geopolitical influence.
“We do not seek to ‘decouple’ our economy from China’s,” she said. “A full separation of our economies would be disastrous for both countries. It would be destabilizing for the rest of the world. Rather, we know that the health of the Chinese and U.S. economies is closely linked. A growing China that plays by the rules can be beneficial for the United States.”
Chinese officials have denounced “the rules” as a euphemism for a series of practices designed to maintain U.S. power.
“If the G-7 is truly against hegemonism and coercion, it needs to look inward and do some serious reflection … reject long-arm jurisdiction and unilateral sanctions, and say no to any policy that puts a certain country first at the expense of others,” Chinese Foreign Ministry spokesman Wang Wenbin said Wednesday. “The world does not need a ‘G-1’ dictating the other countries, nor does the world need a ‘coalition of shared values.’”
Yet Chinese officials have overseen “a recent uptick in coercive actions targeting U.S. firms,” according to Yellen, while wielding its economic clout against U.S. allies in multiple disputes.
“China’s pretext for these actions is often commercial,” the Treasury chief said. “But its real goal is to impose consequences on choices that it dislikes — and to force sovereign governments to capitulate to its political demands.”
She gave that overview on the same day that U.S. Ambassador Nicholas Burns hosted a senior Chinese official at the U.S. Embassy in Beijing. Diplomatic contacts between the U.S. and China have been limited by a series of high-profile controversies in recent months. Chinese officials scrapped military communications channels in August when then-House Speaker Nancy Pelosi visited Taiwan. Secretary of State Antony Blinken had intended to travel to Beijing in February, but the appearance of a Chinese spy balloon in American airspace on the eve of his departure prompted the cancellation of that trip.
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Yellen confirmed that she wants “to travel to China at the appropriate time,” although she hinted when that might happen.
“Some see the relationship between the U.S. and China through the frame of great power conflict: a zero-sum, bilateral contest where one must fall for the other to rise,” she said. “Negotiating the contours of engagement between great powers is difficult. And the United States will never compromise on our security or principles. But we can find a way forward if China is also willing to play its part.”
