During her testimony before the House Financial Services Committee on Tuesday, US Treasury Secretary Janet Yellen highlighted the significance of maintaining ties with China, despite acknowledging concerns related to human rights abuses and trade policies. Yellen firmly stated that decoupling from China would be a "big mistake" for the United States, emphasizing the mutual benefits derived from the trade relationship.
"While we surely have concerns that need to be addressed, decoupling would be a big mistake," stated Yellen, recognizing the accessibility of affordable goods for Americans due to China's efficient production capabilities. Moreover, she underscored the reciprocal advantage China gains from US exports, which also contributes to the American economy.
However, not all lawmakers shared Yellen's perspective. Congresswoman Ann Wagner, Chair of the Financial Services Subcommittee on Capital Markets, expressed her belief that it is necessary to sever ties with Chinese industries and entities involved in human rights abuses. In response, Yellen clarified that existing sanctions prohibit Americans from engaging in business with entities implicated in China's alleged human rights violations.
Reiterating her stance against decoupling, Yellen emphasized the disastrous consequences such a move would entail. "De-risk? Yes. Decouple? Absolutely not," she firmly asserted. This echoes the sentiment expressed by G7 leaders in their joint statement at the recent summit in Japan.
Additionally, Yellen urged lawmakers to increase lending to developing countries as a means to counter China's growing influence. She outlined the Biden Administration's goal to enhance participation in various programs, including those offered by the International Monetary Fund (IMF), the Inter-American Development Bank (IDB), and the African Development Fund (ADF).
Yellen highlighted the importance of these investments in bolstering US engagement in different regions, particularly amid the current geopolitical competition. She emphasized that such lending serves as a crucial counterweight to nontransparent and unsustainable lending practices observed in other countries, such as China.
A recent study revealed that between 2008 and 2021, China provided a significant amount of financial assistance, amounting to $240 billion, to 22 countries primarily involved in Xi Jinping's Belt and Road infrastructure initiative. However, some of these countries are experiencing challenges in repaying these loans, which could exacerbate poverty levels. China has sought assistance from the World Bank and IMF to alleviate the situation but has not been forthcoming with the terms and conditions of the loans.
Yellen expressed her deep concerns regarding China's global activities, particularly its engagement with countries that become trapped in debt, hindering their economic development. She stressed the need for transparency and responsible lending practices to ensure sustainable growth.
