What major events Yellen may talk about during her visit to China are full of obstacles to three major objectives. The United States and the Philippines held military exercises, and Russian ships visited Shanghai. The United States and Russia privately discussed the truce, how the Russian-Ukrainian conflict will end, how will it affect the situation in the Taiwan Strait?
The three main purposes of Yellen's visit to China are to "make up classes"
On the afternoon of July 6, U.S. Treasury Secretary Janet Yellen arrived in China for a four-day visit. Less than three weeks after Blinken's visit to China last month, senior US officials have visited China again, with such a high frequency, which is unusual in the context of Sino-US tensions. According to the New York Times, US climate envoy John Kerry will also visit China later in July, but the date has not yet been set.
Why does the Biden administration send high-ranking officials to China continuously? What is Yellen's purpose in coming to China this time? Some analysts pointed out that Yellen's visit to China this time was first to "make up for the lessons." Scott Kennedy, an expert on U.S.-China relations at the Center for Strategic and International Studies, said the visit to China was long overdue. Because China and the United States, the world's two largest economies, have not had a finance minister's dialogue for more than three years, which is very incredible. He noted that from 2001 to 2016, during the Bush administration and the Obama administration, U.S. Treasury secretaries regularly traveled to Beijing for formal high-level dialogues. It wasn't until Trump took office that this convention was broken.
After Biden took office, although he changed some of Trump's wrong practices, the dialogue between Sino-US Treasury ministers has not been resumed. And this time Yellen's visit to China is to restart this mechanism. A U.S. Treasury official said that while there are significant differences between China and the United States, there are also many areas of common interest. The US side wants a healthy economic relationship with China... To promote growth and innovation in both countries, the United States does not seek economic decoupling, as this would destabilize the U.S. and the global economy.
China and the United States start a science and technology war, Yellen explained the contradiction
The second purpose of Yellen's visit to China is to negotiate with the Chinese side on the recent implementation of chip export controls by the United States to China and China's control of gallium and germanium exports. Reuters pointed out that Yellen's trip will try to convince China that the United States does not allow China to obtain cutting-edge technology to protect national security and solve human rights problems, not to gain economic advantages. Yellen will also highlight global issues that the two countries need to work together to address, such as climate change and the debt burden of developing countries, and try to quell fears that the U.S.-China trade and economic relationship could rupture altogether.
Reuters quoted U.S. officials as saying that Yellen's negotiations with China were not in vain and that communication would be more important when the two countries had differences. The United States has made it clear that it does not support economic decoupling, and the United States hopes to have a frank and productive dialogue to lay the foundation for future communication. The official also mentioned China's "unfair economic practices" that harm U.S. businesses and workers. During the meeting, Yellen will mention what she calls China's "unfair practices," including recent punitive actions against U.S. companies and barriers to market access.
It is worth noting that for Yellen's visit to China, the tone of China hawks has been relatively lowered, and there are more voices advocating communication and eliminating misunderstandings. But on the other hand, the US interpretation of the so-called "misunderstanding" is also full of contradictions. From Biden's formal signing of the Chip Act in August last year, to the introduction of a new version of the national security strategy by the Biden administration in October last year, to a series of measures by the United States to continuously upgrade and expand the trade ban with China, during this period, the United States has always played an active role, while China has generally been passive. To some extent, it was the United States that created and deepened the "misunderstanding" first, initiated and implemented the decoupling of China first, but on the contrary, the Chinese side has been seeking communication and explanation, opposing the decoupling and breaking the chain, and does not want the spiral escalation of tension in the relations between the two countries.
The recent efforts to resume engagement between China and the United States, as well as the US statement of easing the situation, are mainly due to the fact that the decoupling initiated by the United States has begun to eat into the US economy, and at the same time pushed the relationship between the two countries to the brink of greater instability. In essence, whether the US escalates sanctions or eases tensions, it is out of national interests. Even so, China still cooperated to the best of its ability, from the Bali meeting between the two heads of state, to the subsequent exchange of visits and exchanges between Chinese officials at all levels, and the recent visit of Blinken and Yellen to China, all of which show China's goodwill and sincerity. This should not be ignored, and it has been proved that it is unfair to put all the responsibility for eliminating misunderstandings and communication on China.
It can be seen that for Yellen's visit to China, US officials and scholars really hope to create a relatively friendly environment. Rogoff, former chief economist of the International Monetary Fund, said in an interview that Yellen's visit to China played more of a "good cop" role than the "bad cop" played by Blinken during his visit to China. During Blinken's visit to China, he mentioned sensitive issues such as the Taiwan issue and the conflict between Russia and Ukraine. Yellen's visit to China, on the other hand, will most likely not mention these, but will emphasize the common points between China and the United States and look for areas where the two sides can cooperate.
The risk of default on U.S. bonds remains, Yellen wants China to "take over"
So in the view of the United States, in which areas do we need China's cooperation? This brings us to the third purpose of Yellen's visit to China, to persuade China to buy U.S. debt.
Singapore's Lianhe Zaobao published an article saying that in recent years, the scale of US debt has repeatedly reached new highs, exceeding $32 trillion for the first time in mid-June, reaching 145% of the total US economy, nine years earlier than previously forecast. Although the US government has raised the debt ceiling again, if the new debt is not taken over and the original creditors continue to sell, then the US debt will still face the risk of default.
At present, China holds nearly $870 billion in debt, making it the second-largest creditor after Japan. As of March this year, China has reduced its holdings of U.S. bonds for seven consecutive months, and although it briefly increased its holdings in March, it reduced its holdings again in April. Many worry that as U.S.-China relations continue to decline, China may become the next major country to "liquidate" U.S. debt, like Russia. If the United States does not want this to happen, it can no longer be aggressive with China.
One of the reasons why Biden has recently sent a number of senior officials to visit China is also to seek China's help on the US debt issue.
Regarding the possible demands of the US side, Zhu Feng, an expert on Sino-US relations, believes that under the background of the decline in the exchange rate of the RMB against the US dollar, the weakening of offshore RMB transactions, and the rise in import and export pressure, there is basically no policy space for China to significantly increase its holdings of US bonds. Coupled with the intensification of the international trend of "de-dollarization" in recent years, in order to strengthen the security of the monetary system and the stability of the financial system, reducing US debt holdings and increasing gold reserves is a more realistic long-term consideration.
In general, among the three major objectives of Yellen's visit to China, except for the resumption of the Sino-US Treasury Ministers' Dialogue mechanism, the other two goals face certain obstacles. But in any case, managing differences between the two major powers, seeking cooperation, and promoting Sino-US relations to stop the decline and stabilize and return to the right track is the consensus of the two heads of state at the Bali meeting, and maintaining a normal communication and exchange mechanism is a necessary move to implement the consensus.
The Philippine military trespassed on Ren'ai Jiao, and the United States and the Philippines resumed Cold War exercises
Another noteworthy news is that on July 5, the day before Yellen's visit to China, the Philippine Coast Guard issued a statement saying that on June 30, while assisting in a naval operation, the Philippine Coast Guard was tracked, harassed, and obstructed by some "significantly larger" Chinese coast guard ships in the waters near Ren'ai Jiao. Philippine Coast Guard spokesman Jay Tarira said a Chinese coast guard ship was only 90 meters from the bow of the Philippine patrol ship Marabrigo, a dangerous distance that forced the Philippine vessel to slow down to avoid a collision.
There are reports that the naval operation mentioned by the Philippine side refers to the delivery of supplies to the soldiers on the scrapped ship that illegally "sat on the beach". For such behavior, the China Coast Guard generally only tracks and surpasses and determines that the Philippines is only shipping humanitarian supplies, not weapons. Otherwise, the Filipino soldiers on board would have been unable to stay for a long time and would not have been able to stay until today.
Therefore, China's interception behavior is actually very common, and the Philippines has long been accustomed to it. However, this time, the Philippine side not only hyped it up, but also waited until five days after the incident, when Yellen was about to visit China, to single it out, and the fanfare was probably not a coincidence.
Not only that, on July 6, the US and Philippine militaries also held a joint exercise. The U.S. said the exercise was aimed at focusing on mutual defense, strengthening bilateral ties and practicing emerging aviation concepts, including live firing, seizure of airfields, and bilateral air assaults. Brody, commander of the U.S. Marine Corps' First Expeditionary Force, said the exercise will strengthen the development of aviation, ground and logistics-related capabilities of the U.S. and Philippine militaries, and the two sides will deepen their partnership, contribute to regional peace and stability, and promote freedom, openness and prosperity in the Indo-Pacific.
Some media noted that the code name of this exercise is "Thunder Confrontation", and the "Thunder Confrontation" military exercise was founded by the United States and the Philippines in 1976. The exercise ended in the Philippines in 1991 after U.S. troops withdrew from the Philippines. Now, the United States is reusing the exercise code name that has been abandoned for more than 30 years, which has a strong Cold War connotation and strong aggression, sending a clear signal that the US military has returned to the Philippines.
Coincidentally, on July 6, Chinese leaders inspected the PLA's Eastern Theater and delivered an important speech, stressing that the world has entered a new period of turbulence and change, and the security situation on the mainland has become more unstable and uncertain. The PLA should deepen war and operational planning, speed up the improvement of its ability to win wars, and resolutely defend national sovereignty, security and development interests.
At the sensitive time of Yellen's visit to China and the US-Philippine military exercise, the Chinese leader's visit to the Eastern Theater, which is responsible for the East China Sea and the Taiwan Strait, is of course not without purpose, but is conveying to China at home and abroad that China firmly defends national sovereignty and opposes "Taiwan independence" separatist activities and interference by external forces.
Russian ships visit Shanghai, and the Chinese and Russian navies conduct joint military exercises
At the same time, there are new developments in the Chinese and Russian navies. According to reports, two Russian warships that had passed through Taiwan's east coast and Japan's Okinawa Islands at the end of June arrived in Shanghai on July 5 for a seven-day visit. During this period, the two Russian ships will hold joint military exercises with the Chinese Navy, including formation operations, communications and sea rescue.
Some analysts have noticed that in recent times, the interaction and exchanges between the Chinese and Russian militaries have been very intensive. First, on June 9, Liu Zhenli, chief of staff of the Joint Staff of the Central Military Commission, and Gerasimov, chief of the General Staff of the Russian army, held a video talk, in which the two sides said that they would continue to expand military cooperation. Subsequently, on 27 June, the Chinese and Russian Foreign Ministries held regular consultations on the issue of missile defense. On Monday, Chinese Defense Minister Li Shangfu met with visiting Russian Navy Commander-in-Chief Yevmenov in Beijing. Then on Thursday, the Chinese and Russian navies began joint exercises.
Behind this series of interactions, there is a core logic, that is, in January next year, the Taiwan region will hold a leadership election, and Lai Qingde, the Democratic Progressive Party candidate who advocates "Taiwan independence," has a greater chance of taking office, and cross-strait relations may usher in drastic changes. Since the United States has returned to the Philippines and Japan has begun to deploy troops in the southwestern islands, the possibility of U.S. and Japanese intervention in the Taiwan Strait is also very high. Against this background, the significance of strengthening joint exercises and training between the Chinese and Russian navies and containing the United States and Japan is very strong.
For Russia, the symbolic significance of the joint action of the Chinese and Russian navies is greater than the practical significance. The significance of the appearance of Russian warships is not to participate in the war, but to play the role of strategic deterrence. This strategic deterrence is not only reflected in the Russian Far East and the Pacific Ocean, but also in the Russian-Ukrainian battlefield in the southwest.
The United States and Russia are negotiating secretly, and the conflict is expected to end in the fall?
NBC reported on July 6 that in the past year, the United States has met secretly with Russian officials many times, including one held in April, with the participation of Russian Foreign Minister Sergei Lavrov and the US Council on Foreign Relations. The purpose of frequent private contacts between the United States and Russia is mainly to lay the foundation for negotiations and compromises to end the Russian-Ukrainian war in the future.
The reason why the United States will discuss the armistice with Russia is, on the one hand, the lack of confidence in the counteroffensive plan of the Ukrainian army; On the other hand, the United States clearly understands that Russia is a nuclear power, and that nuclear powers will not accept defeat, and if Russia is forced to the point of last resort, then it may use nuclear weapons to turn the situation around. This is a lose-lose outcome for the United States.
For now, the secret negotiations between the United States and Russia seem to have progressed. On July 6, Belarusian President Alexander Lukashenko said that Russian-Ukrainian peace talks may begin in the fall, but that the peaceful resolution of the war should not depend on the United States, which is "a matter for Russia and Belarus." Lukashenko also said that the war was being fought on a common Slavic homeland, as if it were taking place in his own country, which made him very sad. But he is not playing the role of a "mediator", because "Ukraine, Belarus and Russia are all in the same boat", everyone has made enough mistakes, and it is necessary to stop the war immediately and sit at the negotiating table without any preconditions.
It is worth noting that in recent times, Zelensky is visiting Europe for guarantees and trying to persuade NATO to allow Ukraine to join. The reason for this is likely because Zelensky has sensed in advance that the Russian-Ukrainian conflict is showing signs of ending, and the United States may have reached a secret agreement with Russia behind its back. But the Ukrainian side does not know about the content of the agreement, and it is out of this sense of unease that Zelensky will eagerly want to join NATO and hope to be protected by the West after the war.
We have mentioned in previous episodes that no matter how the Russian-Ukrainian war ends, it may have an impact on the situation in the Taiwan Strait. If the United States and Russia make progress in bypassing the armistice agreement in Ukraine, it will deal a heavy spiritual blow to the "Taiwan independence" forces on the island. But at the same time, the United States will also withdraw from the Ukrainian battlefield and put more forces into the Asia-Pacific region, and the material assistance received by the Taiwan authorities may increase. Therefore, for the way the war in Ukraine will end, we need to make multiple preparations in case there is more uncertainty about the situation in the Taiwan Strait next year.
At a sensitive moment, Lithuania hyped up Taiwan-related issues
In fact, new uncertainties affecting the situation in the Taiwan Strait have emerged. Lithuania unveiled a new version of its Indo-Pacific strategy on Wednesday, ignoring warnings from Chinese mainland and reiterating its decision to forge strong economic ties with Taiwan. Lithuania's version of the Indo-Pacific strategy declares that "developing economic relations with Taiwan is one of Lithuania's strategic priorities" and accuses Chinese mainland of using "economic, political, diplomatic and other types of coercion" to achieve its goals. Lithuanian Foreign Minister Landsbergis called the strategy "a new and important step in strengthening Lithuania's comprehensive cooperation with the region." The document also stressed that Lithuania follows the "one-China" policy, but "military support for Russia's aggression against Ukraine, or coercion by force to change the status quo in the Taiwan Strait, are red lines."
This is not the first time that Lithuania has acted as a spearhead in provoking the situation in the Taiwan Strait. Starting in 2021, Lithuania took the lead in withdrawing from the China-CEEC cooperation mechanism and approved the opening of a representative office of Taiwan in the capital Vilnius. In the following two years, Lithuania also ignored China's stern warning to immediately correct its mistakes, interfered in China's internal affairs many times, and hyped up anti-China issues such as Xinjiang and Taiwan.
Lithuania will host the NATO summit on July 11-12. At such a point in time, Lithuania issued such a strategic document emphasizing the upgrading of relations with Taiwan, vigorously exaggerating the so-called Chinese military coercion, which needs to arouse sufficient vigilance. During this NATO summit, the Taiwan Strait issue may be further fermented, and the hype about China will not stop. As the Taiwan regional leadership election approaches in January next year, I am afraid that the outside world's interference in the situation in the Taiwan Strait will increase, and we need to be prepared to meet the storm.