Top US Treasury officials visit Beijing for economic talks

The Biden administration is sending a delegation of senior Treasury Department officials to Beijing this week for a round of economic talks, as the world's largest economies look to continue the engagement efforts that President Biden and his Chinese counterpart, Xi Jinping, agreed to last year were to strive for.

A Treasury official, speaking on condition of anonymity because the trip has not been publicly announced, said the two days of meetings would include “frank discussions” about China's use of non-market economic practices such as government subsidies. U.S. officials also plan to discuss concerns about industrial overcapacity, which could flood international markets with cheap products.

They will also discuss ways to solve public debt burdens that are weighing on low-income countries and preventing some of those countries from investing in sustainable development and climate initiatives. China is one of the world's largest creditors and has faced international pressure for concessions that would enable a global effort to restructure hundreds of billions of dollars of poor countries' debt.

More broadly, the two governments will discuss the macroeconomic prospects for their countries, whose economies are critical to the health of the overall global economy. The United States appears to be the most resilient economy in the world. China, meanwhile, continues to be plagued by a financial sector struggling to control vast amounts of local government debt, a volatile stock market and a real estate crisis.

Last week, the International Monetary Fund forecast in its latest economic outlook that China's economy would grow 4.6 percent in 2024, a faster pace than previous projections. But it also called on China to make longer-term structural changes to its economy, such as overhauling its pension program and reforming its state-owned enterprises, to prevent its output from slowing more dramatically.

“Without these reforms, there is a risk that Chinese growth would fall below 4 percent,” IMF Managing Director Kristalina Georgieva told reporters last Thursday.

The US and Chinese officials will also discuss mutual efforts to combat climate change and the mechanisms of investment screening programs that create new economic barriers between the two countries.

The revival of a formal economic dialogue structure is intended to prevent misunderstandings between the United States and China from turning into economic warfare.

The five-member Treasury Department group will be led by Jay Shambaugh, the department's assistant secretary for international affairs. It is the first such meeting in Beijing of the economic working group set up last September. In January, a group of Treasury Department officials with a focus on financial issues held talks in Beijing.

The visit could pave the way for a second trip to China by Treasury Secretary Janet L. Yellen, who traveled to Beijing last summer.

The Biden administration has sought to convince Chinese officials that President Biden's efforts to diversify U.S. supply chains outside China are not intended to harm Beijing's economic development.

The Treasury official declined to comment on specific concerns Mr. Shambaugh would raise with his colleagues during the trip. But Biden administration officials have continued to complain about China in recent months subsidies for its domestic industries And discrimination against foreign competitors.

In a speech to the US-China Business Council in December, Ms Yellen lamented that China continues to use unfair economic practices, restrict access to foreign companies and put pressure on US companies.

“For too long, American workers and companies have been unable to compete on a level playing field with those in China,” Ms. Yellen said.

While the increased engagement appears to have softened some of the public displays of tension between the United States and China, it is unclear how much progress is being made on the ground.

The Biden administration moved forward last August with plans to implement new rules to restrict U.S. investment in certain Chinese sectors that the United States considers national security risks. Two months later, China announced it would restrict exports of graphite, a key component of electric vehicle batteries.

But the two countries say they want to continue exploring areas of cooperation.

“These trips are of significant importance in preventing a further escalation of hostilities, especially as US election rhetoric increases,” said Eswar Prasad, a professor at Cornell University and former head of the International Monetary Fund's China division. “I think both sides are very keen to prevent any further escalation of hostilities.”