U.S. Treasury Secretary Janet Yellen’s visit to China is “crucial” to making sure that each countries proceed talking to one another, said Eswar Prasad, an economics professor at Cornell University.Â
“The crucial element, which is embodied in Janet Yellen’s visit, is that the 2 sides keep talking on technical levels, but in addition on the very senior policy levels,” Prasad told CNBC’s “Squawk Box Asia” on Friday.Â
Tensions between the 2 countries have shot up lately, for the reason that U.S.-China trade war began in 2018 throughout the Trump-era. Today, geopolitical tensions proceed amid accusations over China’s purported spy balloon in U.S. airspace, in addition to their battle for tech supremacy.
Yellen landed in Beijing Thursday on a four-day trip.
She is attributable to meet Premier Li Qiang on Friday afternoon, following earlier meetings with former Vice Premier Liu He and ex-central bank governor Yi Gang, the Treasury Department said.
Her visit comes weeks after Secretary of State Antony Blinken’s visit to Beijing — the primary high-level meeting between the 2 countries after months of tensions.
US Treasury Secretary Janet Yellen arrives at Beijing Capital International Airport in Beijing on July 6, 2023.
Mark Schiefelbein | Afp | Getty Images
“Damage control is basically the important thing,” Prasad told CNBC, adding that Chinese officials can cope with anti-China rhetoric, so long as they don’t translate into hostile actions that might keep China from its economic development.
“Officials in China are very attuned to the election cycle within the U.S. they usually recognize that with November 2024 already looming, there may be a prospect of anti-China rhetoric getting even hotter in Washington,” he said.
“I feel the hope is that they will ward off any further actions that they perceive as being hostile towards China.”
The Biden administration’s attitude toward China has been “a bit of bit less confrontational” this 12 months, said Andy Rothman, investment strategist at Matthews Asia, who pointed on the market could possibly be higher cooperation, engagement and trust going forward.
“U.S.-China relations aren’t going to recuperate … But I feel the risks of an accident spiraling uncontrolled right into a crisis have gone down so much during the last couple of months,” Rothman told CNBC on Friday.
Impact on China’s economy
The world’s second largest economy has seen a slew of disappointing economic data within the second quarter, fueling concerns that the post-Covid rebound could also be weaker than expected.
Beijing has insisted that China’s growth remains to be on the right track to achieve its the goal of around 5%, but Wall Street banks have been downgrading their GDP forecast for China, citing economic turbulence ahead.
China’s economy is at a “perilous juncture,” Prasad said.
He highlighted that domestic sources of growth — corresponding to the true estate market, infrastructure investment and government spending — have weakened and can likely stay weak.
“Tamping down the temperature on the U.S.-China relationship actually would help when it comes to domestic economic activity, and on the margin, not less than when it comes to helping to avoid confidence from falling any further,” the economist added.
The 2 countries must “compartmentalize” their geopolitical and economic issues for progress of their relationship to be made,” Prasad said.
Rothman doesn’t expect geopolitical tensions to have a “significant impact” on China’s economy, and said a domestic demand driven economy and consumer-led recovery are already underway.
Still, he agreed that American investors will proceed to stay “really, really cautious” on China and enhancements within the two countries relationship will unlikely to be seen through the tip of 2024.
