U.S. Treasury Secretary Janet Yellen visited China for a total of four days. What is Yellen here to talk about?
Let's look at the timing first, Yellen's trip may be her last visit to China during the Biden administration. U.S. Secretary of State Antony Blinken, who followed Yellen, may also be his last trip to China.
Therefore, I would like to say that the US side must step up and seize the last opportunity, "after this village, there will be no such shop."
Biden sent two senior members of his cabinet to visit China at this point in time, because the end of the year is the time to vote in the US presidential election, and there is not much time left for Biden.
1 Biden: Working hard is fruitless
Counting Biden's actions at home and abroad in the past three years, it can be described in eight words: "Working hard is fruitless."
Biden has suppressed inflation internally, but inflation has not been resolved so far.
During Biden's tenure, the Inflation Reduction Act and the CHIPS and Science Act were passed. In late March, the Biden administration relaxed its goal of reducing tailpipe emissions by 2030 and increasing electric vehicle sales. This is Biden's retreat from environmental protection measures, as well as in the field of new energy vehicles, from his previous lofty goals.
On the external front, the conflict between Russia and Ukraine has lasted for more than two years, and the NATO bloc led by Biden was powerful in the early stages of the conflict, but it was unable to successfully drag Russia down from beginning to end, and it had to spend huge sums of money to aid Ukraine every year.
Although the United States has succeeded in harvesting Europe, European countries have also begun to resentful of the United States, and according to what we said before, the benefits that the United States got in the early stage of the Russia-Ukraine conflict will slowly spit out. In essence, France and Germany are also planning how to get out of the Russia-Ukraine dilemma under the leadership of the United States. For details, please refer to yesterday's article: "The Great War is Ready to Go: Germany Opens the Door to NATO Troops".
The same is true of the Palestinian-Israeli conflict, where the Biden administration has never been able to come up with a way to deal with what the United States previously considered a "small" slipper army, the Houthis.
In January, the United States reclassified the Houthis as a terrorist organization. A month later, it was said that it would consider removing the Houthis from the list of terrorist organizations. At the same time, it was said that if the Houthis promised to end the blockade of the Red Sea, the United States would consider removing the Houthis from the list of terrorists.
In terms of China policy, Biden has not been able to suppress the momentum of China's development in the past three years, nor can he decouple from China's economy, and the only place where the performance can still be seen is the chip export restrictions to China.
However, even in terms of chip restrictions on China, after Huawei launched the Mate 60 Pro mobile phone in August 2023, this aspect is still shaky. There is news that Huawei will launch the Mate 70 series this year, locking in more sophisticated chip process technology.
Biden can't hold a political record that can be publicized to the outside world, how to elect, how to convince voters?
What's worse is that the Biden administration is facing the same fate as last year. In the first five months of last year, the Biden administration faced the issue of the federal debt ceiling. It was not until early June that the federal debt ceiling was extended until January 2025.
Since then, the Biden administration has spent desperately to support economic growth and prop up the U.S. stock market. Yellen, the big manager of the Biden administration, on the one hand, picked up the check for "no" debt ceiling and desperately spent money on the Biden administration. As a result, we saw that from the beginning of June to the end of last year, the Biden administration was saddled with an extra $1 trillion in debt every 100 days.
On the other hand, Yellen is actively raising money for the Biden administration and trying her best to sell US bonds.
However, it has not been easy to sell US bonds for more than half a year! Who wants to buy more from overseas countries? Even if they are willing, they are not able to do so, because the United States is burdened with too many debts and the amount of US bonds to be sold is too high.
So, Yellen came to China. It turned out that Yellen came to China to sell U.S. bonds.
2 Why are Yellen and Blinken visiting China?
However, Yellen also came to China last year, and if she really wants to persuade China to buy U.S. bonds, she can't sell them.
Yellen has already tried this, and China did not cooperate with the United States to buy more U.S. bonds last year, and it will not be this year.
Therefore, Yellen came for "other" purposes.
Yellen came to China last year, but China and the United States did not reach a deal. Although no negotiations were reached, China and the United States set up two working groups – the Economic Working Group and the Financial Working Group. The Yellen-led Treasury Department is the lead U.S. agency for both working groups. It is expected that the two working groups will communicate every one or two months.
What do you want to communicate? Of course, it is to demand that China be more open to finance. As long as China opens up its finances, Biden can use this as propaganda and become a political achievement of the Biden administration. For Yellen, that's her performance.
What we need to pay attention to is whether Yellen will have a press conference with the Chinese representative before she ends her visit and prepares to leave Beijing.
3 The negotiation techniques used by the U.S. side
However, this may not be the most important thing. This is because China has its own progress in opening up the financial sector. China's opening-up in the financial sector will be implemented step by step and gradually.
Therefore, Yellen was only able to achieve a small result in the financial field, which categorically cannot satisfy the appetite of the US side.
This is because opening up the financial sector step by step will not solve the problems of the United States itself.
It is necessary to understand the methods used by the US side in negotiations, which are usually two ways.
First, maximum pressure.
When the United States negotiates with foreign countries, it will first let out the wind and raise the asking price. This method of pressure is not unique to Trump. Is Trump just more high-profile, asking for a higher price, or even shouting indiscriminately.
Second, blame the other party.
After exerting pressure, if the results (of course, benefits) of the US side are obtained in the subsequent negotiations, it is enough, and if not, the US side will blame the other side and then seek retaliation.
Yellen's trip was no exception. Yellen said in advance that China had overcapacity, pushed product prices too low, and disrupted global prices, thereby causing American workers to lose their jobs and harming the interests of American companies and workers.
To summarize Yellen's statement, the U.S. blames the Chinese government for subsidizing, creating a surplus of goods, and dumping them around the world.
Therefore, we can conclude that the United States, represented by Yellen, in addition to demanding China's opening up in the financial field, also hopes that under the pretext that China can maintain the global financial order by buying more U.S. bonds, Yellen will put pressure on China in some industrial fields.
4. The U.S. should start with the automotive and new energy industries
In which industrial fields? New energy vehicles, electric vehicle batteries, solar cells, etc.
In fact, the United States has already restricted China's sales to the United States in these three areas, so what more can the United States ask for?
In May 2023, the U.S. Congress passed a resolution to reinstate tariffs on Chinese solar panels. The U.S. imposed tariffs, and then found that this measure led to a delay in the implementation of solar power generation in the United States, and the cost was too high, which was not conducive to the promotion of the new energy field in the United States.
So the U.S. removed the additional tariffs, but it didn't take long for them to come back to them, and so on.
Doesn't the U.S. subsidize local solar operators or users? Absolutely. Since the U.S. government is engaged in domestic subsidies, how can it blame China?
Not to mention the Inflation Reduction Act's subsidies to automakers in the United States, as well as in Mexico and Canada.
The United States is subsidizing its own industry with one hand, and accusing China of subsidies with the other.
Why did the United States choose these areas to challenge China?
At this time, we have to go back to the previous statement, about the usual method used by the United States in foreign negotiations: maximum pressure + blame the other side.
In fact, the US side also knows that "maximum pressure" on China is useless, and has carried out extreme pressure on China many times since the Trump era, but it has not worked.
However, this time, the United States saw an opportunity, since last year, Europe has felt strong competition from China's auto industry, so the European Union announced in October 2023 that it will officially launch a countervailing investigation into China's pure electric vehicle imports.
The United States smelled an opportunity and wanted to take advantage of the situation, adding fuel to the fire and expanding the problem in this regard.
That's why Yellen said before, accusing China of subsidies, overcapacity, disrupting global prices, and dumping to the world.
Because before that, although the United States tried its best, it was never able to persuade European countries to follow the United States in imposing tariffs on China and restricting the import of Chinese goods.
Now it is seen that China's auto industry will surpass Japan in 2023 and become the world's largest auto exporter. China's success shook Europe and made it afraid of competition from China's auto industry.
Therefore, the United States took advantage of the situation to form a double sword and sharp edge, cutting at the Chinese industry.
In fact, whether it is subsidies, overcapacity or dumping, what right does the US have to blame China?
The US itself is engaged in subsidies and has also imposed restrictions on Chinese products, forming trade barriers to Chinese products, so what right does the US have to blame China?
To put it bluntly, the United States has lost the trade war with China before. Inability to decouple from China's economy. Therefore, they want to take advantage of the EU's dissatisfaction with the strong competitiveness of China's electric vehicles, so as to form a situation in which the United States and Europe are sandwiched by China's industry.
The U.S. first started with the electric vehicles, pure electric vehicle batteries, and solar cell industries, and if it succeeds, the U.S. will inevitably follow and expand to other industries.
Therefore, do not underestimate the US plot. The U.S. has failed to impose tariffs in a trade war, economic decoupling, friendly and nearshoring outsourcing, and chip sanctions have gradually become ineffective. And the financial war is not sure of defeating China.
Therefore, the US side summed up one reason, because in the past few years, only the US and China have fought alone, and Europe has not actively participated.
Taking advantage of the fact that China's electric vehicles have made the European auto industry powerless, the United States began to take action. Blame China for the loss of competitiveness between the United States and Europe.
Accusing China of undermining global markets and causing losses for American and European companies and job losses.
Speaking of which, the U.S. side is still playing the same game, believing that the "U.S. + Europe" economy is large enough to work with Europe to close the U.S. and European markets to China.
The point is, will China accede to the U.S. demands and limit itself to the development of these industries?
Of course not.
In fact, although the US sent Yellen to China to discuss with China on issues such as financial opening, the purchase of US bonds, and the purchase of US agricultural products, as well as the issue of overcapacity with China, the US side also knew that China would not agree.
Then, the US side will then carry out the actions just mentioned, and then turn to Europe to accuse China of China's refusal to cooperate.
Based on this, the US side will persuade Europe to take action against China and close the US and European markets to China. Thus returning to the line of economic decoupling from China during the Trump era in 2019.
Only this time the US side will feel different from the last time, because the US side believes that with the help of Europe, the chances of success will be much greater than the previous one.
5 Increase finance, double sword attack
"What if", we say, what if, the United States succeeds?
If the US side succeeds, it will make the next move.
Isn't the Federal Reserve going to cut interest rates at some point this year? At this stage, the US interest rate is so high, and if it does not cut interest rates, the US banking, financial, and real estate industries will not be able to stand it, and the spending power of the American people will also be affected, because credit card interest rates are very high.
At this time, the United States will make a "double sword" attack, one is to join hands with Europe to attack China's industry, and the other is to choose a certain point in time to increase the intensity of the financial war against China.
For example, to raise interest rates again in Japan, or to plan other financial attacks.
We will continue to discuss the follow-up development in this regard, and may also explore some countermeasures, so please stay tuned.
That's all for today's analysis and reasoning, we'll see you next time!