US-China Relations Updates

The article published on November 2nd in the South China Morning Post is titled “Treasury Secretary Yellen: US Must Have Serious and Clear-headed Attitude towards China’s Economy.” The article mentions that the US Treasury Secretary reiterated that Washington is not seeking to decouple from China but outlined its Indo-Pacific trade strategy and emphasized national security and promoting human rights as pillars of the US economic strategy towards China. However, it is evident that this is merely a superficial claim of not decoupling, as in reality, another approach is being employed.

In fact, the US has long recognized that a rapid decoupling is not feasible, which was already evident during the Trump administration. Instead, they have employed measures such as the so-called “genocide” and “forced labor” accusations with the aim of a gradual and selective decoupling. For instance, Apple cited these reasons to remove OFILM from its supply chain. Without Huawei’s breakthrough, the US would likely have succeeded in this regard, given their control over technology and production lines.

Therefore, the so-called non-decoupling is essentially an indirect acknowledgment that rapid decoupling is not viable. However, it does not mean that decoupling is not taking place; it is simply being pursued through a different strategy.

According to reports from Reuters and the South China Morning Post on the 2nd, with about a week remaining until the Asia-Pacific Economic Cooperation (APEC) summit, U.S. Treasury Secretary Yellen discussed the White House’s Indo-Pacific economic strategy during a speaking engagement. She reiterated that the decoupling of the U.S. and Chinese economies is unrealistic, emphasizing the need for a “serious and clear-headed” economic policy towards China and stating that the U.S. does not seek to decouple from China.

Reuters reported that Yellen also attempted to assure Asian countries that the U.S. attitude towards China would not cause a “disastrous” global economic split, forcing these countries to choose sides. She stated in her speech that the U.S. is not interested in a “divided world with catastrophic consequences.”

The APEC summit is scheduled to take place in mid-November in San Francisco, United States, and Yellen’s speech ahead of the summit aims to alleviate concerns from various parties.

During the speaking engagement at the Asia Society Policy Institute in Washington on Thursday local time, the U.S. Treasury Secretary discussed the U.S. Indo-Pacific economic strategy. She emphasized that the U.S.-China relationship is one of the most important bilateral relationships in the world, and a complete decoupling between the two countries is “fundamentally unrealistic,” especially considering the complexity of the Asian supply chain and the close economic ties between regional economies and China.

She reiterated that the U.S. is not seeking to decouple from China but needs a “serious and clear-headed” economic policy towards China. She stated that Washington is pursuing “risk reduction and diversification” in its economic relations with China through investments in domestic manufacturing and strengthening ties with global allies and partners, including those in the Indo-Pacific region.

Yellen said, “A complete decoupling of our economies or forcing countries, including those in the Indo-Pacific, to choose sides would have significant adverse effects on the globe. We have no interest in a divided world with the catastrophic consequences that would follow.”

She also added that the U.S. will not compromise on issues related to national security interests but seeks to establish a “healthy and mutually beneficial economic relationship” with China.

According to reports, Yellen also outlined the U.S. strategy to expand trade in the Indo-Pacific region during her speech. She stated that the Indo-Pacific economic strategy requires much more than just a strategy focused on China.

Yellen emphasized the Biden administration’s commitment to strengthening investment and trade cooperation with countries in the Indo-Pacific region, which would bring “enormous potential benefits” to both the United States and Indo-Pacific countries. She highlighted the importance of strengthening economic ties with the region for U.S. supply chain security.

She mentioned the U.S. plans to deepen relations with India and Vietnam, particularly highlighting Vietnam’s role in the global semiconductor supply chain. She stated that the U.S. is encouraging American companies to invest in Vietnam and collaborating with the Vietnamese government and private sector to support workforce development there.

Yellen also discussed the U.S.’s plans to enhance multilateral engagement, such as the Indo-Pacific Economic Framework (IPEF), stating that the U.S. is importing more products from major partner countries like India, Vietnam, and Mexico across various sectors, from auto parts to electronics, reducing reliance on any single country.

The South China Morning Post pointed out that the reference to a “single country” refers to China. According to a research report released last week, as of 2021, China is the largest source country for manufactured goods among all IPEF member countries, except for Brunei, and is the largest export destination for half of the IPEF member countries’ manufactured goods. Analysts have stated that achieving diversification and excluding China is not an easy task.