China says VP Liu had 'constructive' meeting with US Treasury chief Yellen

Chinese Vice-Premier Liu He (left) spoke with US Treasury Secretary Janet Yellen in a call on July 5, 2022. PHOTOS: REUTERS

BEIJING (REUTERS, BLOOMBERG) - Chinese Vice-Premier Liu He had a "constructive" virtual dialogue with United States Treasury Secretary Janet Yellen on Tuesday (July 5), with both sides agreeing to better coordinate macro policies, China's commerce ministry said.

The two sides had a "pragmatic and frank" exchange of views on topics including the stability of the global industrial and supply chains, said a statement from the ministry.

China also expressed concerns over the additional tariffs the United States imposed on Chinese goods and sanctions on Chinese firms, and both sides agreed to maintain dialogue, the ministry said.

"As the global economy faces grim challenges, there is a great significance to strengthen the communication and coordination of the macro policies between China and the United States. Safeguarding the stability of global industrial chains and supply chains will serve the benefits of China, the US and the whole world," according to the statement.

The US Treasury Department concurred in its own statement, saying the exchange was “candid and substantive”, but did not mention China’s concern about US tariffs.

It did say that Dr Yellen “frankly raised issues of concern including the impact of Russia’s war against Ukraine on the global economy and unfair, non-market” economic practices by China.

The invitation to Chinese Vice-Premier Liu for the call came from Dr Yellen, according to the ministry.

Chinese Foreign Ministry spokesman Zhao Lijian said at a regular press briefing on Tuesday that China has noted the accusation of “non-market economic practices” from the US readout.

“What the US said does not comport with facts. What has happened over the past 40-plus years shows that the success of China’s economy is also the success of the reform and opening-up policy, and the success of marrying the market with the role of government,” he said.

“China’s reform and opening-up is good for China and for the world. It has not only propelled China’s economic development but also made key contribution to the prosperity of the world economy,” he noted.

On tariffs, Mr Zhao said lifting all the additional tariffs on China is good for both China and the US, and good for the world.

“According to the estimates of US think-tanks, the removal of tariffs on imported Chinese goods will strip 1 per cent off inflation in the US. Given the high inflation in the US, the sooner these tariffs on China are removed, the sooner it will benefit American consumers and businesses.”

Mr Zhao noted that the two sides had a pragmatic and candid exchange of views on such topics as the macroeconomic situation and the global industrial and supply chains. 

“The exchange was constructive,” he said. 

The call between Dr Yellen and Mr Liu came after reports that President Joe Biden may announce a rollback of some US tariffs on hundreds of billions of dollars worth of Chinese goods as soon as this week. 

As inflation increases in the US, expectations are rising that the administration will ease some of the taxes to help lower the costs of everyday merchandise.

Senior members of the administration, though, seem divided about the need to lift tariffs. 

Dr Yellen said last month that the administration wanted to reconfigure the tariffs, which “really weren’t designed to serve our strategic interests”.

That was a contrast with the view of US Trade Representative Katherine Tai, who has called the levies “leverage” against China and questioned how much effect removing them would have on inflation.

Since taking office in January last year, the Biden administration has not held any substantive economic talks with China and has not secured any further trade concessions. 

Instead, economic policy in Asia has focused on starting a new trade agreement with allies in the region, which is still in its early stages. 

Analysts say scrapping the tariffs would have only a marginal effect on US inflation and China’s trade, with a possible recession in the world’s largest economy a bigger threat to China’s outlook. 

Mr Larry Hu, head of China economic analysis at Macquarie Group, said: “The more concerning thing for exports in the short term is a potential US recession.”

“With or without the tariffs, China’s export growth will slow down anyway.” 

Barclays estimated that if there was a complete rollback of tariffs, the maximum direct effect on US inflation is a one-time reduction of 0.3 percentage point.

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