Secretary Yellen’s Policy Speech Defines a Roadmap for the U.S.-China Economic Relationship

Shortly after Dean Jim Steinberg introduced her on April 20, 2023 for a major policy speech about the U.S.-China economic relationship, U.S. Treasury Secretary Janet Yellen told her audience why she chose to give her remarks at Johns Hopkins SAIS.

“SAIS has one of the oldest and most extensive China studies programs in the country,” Yellen said, noting how the school’s leaders took the initiative to seek out their Chinese counterparts following the establishment of diplomatic relations between the United States and the People’s Republic of China in 1979. “The result [was] the establishment of the Hopkins-Nanjing Center in 1986 – one of the first Western academic programs in modern China.”

Delivered amid an atmosphere of increasingly frosty relations and significant differences between the United States and China over defense and foreign policy issues (among them Taiwan and Russia’s war in Ukraine), Yellen’s speech acknowledged recent setbacks in the era of rapprochement and gradual normalization that began with former President Richard Nixon’s landmark trip to China in 1972. In the years following Nixon’s outreach, China adopted market reforms, opening its doors to the global economy, and driving a rapid growth that has propelled the country into becoming the second-largest economy in the world.

“But in recent years,” Yellen said, “I’ve also seen China’s decision to pivot away from market reforms toward a more state-driven approach that has undercut its neighbors and countries across the world. This has come as China is striking a more confrontational posture toward the United States and our allies and partners – not only in the Indo-Pacific but also in Europe and other regions.”

The relationship between the United States and China, Yellen acknowledged, “is clearly at a tense moment.” She outlined three principal policy objectives of the U.S. economic approach to China:

• Prioritizing the national security interests of the United States and its allies and partners, while also protecting human rights
• Seeking a healthy economic relationship with China that fosters growth and innovation in both countries, based on healthy and fair competition
• Seeking cooperation on the urgent global challenges of our day, such as climate change and debt distress in emerging markets and developing countries.

Yellen emphasized that anyone who believes the United States is a declining power is grossly misguided—and not just because the U.S. economy remains the largest in the world. She said: “It’s important to know this: pronouncements of U.S. decline have been around for decades. But they have always been proven wrong. The United States has repeatedly demonstrated its ability to adapt and reinvent to face new challenges. This time will be no different – and the economic statistics show why. Since the end of the Cold War, the American economy has grown faster than most other advanced economies. … Our educational and scientific institutions lead the world. Our innovative culture is enriched by new immigrants, including those from China – enabling us to continue to generate world-class, cutting-edge products and industries.”

To safeguard national security and protect human rights, Yellen said the United States will act decisively, as necessary, using such measures as export controls to keep sensitive technologies from the Chinese military and state surveillance apparatus.

“As we take these actions, let me be clear: these national security actions are not designed for us to gain a competitive economic advantage, or stifle China’s economic and technological modernization,” she stated. “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.”

Yellen said there will be no compromise on the protection of human rights, either. But she also said the United States does not seek to “decouple” its economy from China’s, since such a separation would be disastrous for both countries and destabilize the rest of the world.

She concluded: “The United States believes that responsible economic relations between the U.S. and China is in the self-interest of our peoples. It is the hope and expectation of the world. And at this moment of challenge, I believe it must be the choice that both countries – the United States and China – make.”

The full text of Secretary Yellen’s speech can be found here.

Watch the event in its entirety here.