Treasury Secretary Janet Yellen said it is in the United States’ best interest to maintain ties with China, though she said documented allegations of human rights abuses in China and questionable trade policies need to be “addressed.”
“While we surely have concerns that need to be addressed, decoupling would be a big mistake,” Yellen said in her testimony before the House Financial Services Committee on Tuesday. Americans “benefit greatly” from buying goods that are cheaper to produce in China, she added. China equally benefits from US exports that also bolster the US economy.
That’s why, she stressed, it would be “disastrous” to cease trading with China. “De-risk? Yes. Decouple? Absolutely not,” Yellen said, echoing the joint statement leaders from the Group of Seven (G7) made at last month’s summit in Japan.
Missouri Republican Rep. Ann Wagner criticized Yellen’s approach.
“I think it’s appropriate, and in fact, essential, that we decouple from Chinese industries and entities that are actively participating in unthinkable human rights abuses,” Yellen responded saying there are sanctions in place that prevent Americans from doing business with any entities involved in China’s alleged hu,man rights violations.
Yellen wants the US to lend more money to developing countries to counter China
Yellen also called on lawmakers to lend more money to developing countries to counter China’s growing influence.
In addition to increasing lending to other International Monetary Fund programs, Yellen told lawmakers that the Biden Administration wants to boost involvement in the Inter-American Development Bank group’s private-sector investment fund and the African Development Fund.
“These investments will bolster our engagement in these regions at a time of geopolitical competition,” Yellen said. Lending to organizations like the IMF “serves as an important counterweight to nontransparent, unsustainable lending from others like China.”
Between 2008 and 2021, China spent $240 billion bailing out 22 countries that are “almost exclusively” debtors in Xi Jinping’s signature Belt and Road infrastructure project, including Argentina, Pakistan, Kenya and Turkey, according to a recent study.
But many of the countries it has lent to are struggling to repay the loans, which could put their citizens in deeper levels of poverty. China has called upon the World Bank and IMF to help bail out some of the countries, but it hasn’t been transparent about the terms of the loans and other crucial details.
Yellen testified earlier this year that she is “very, very concerned about some of the activities that China engages in globally — engaging in countries in ways that leave them trapped in debt and don’t promote economic development.”
“We are working very hard to counter that influence in all of the international institutions that we participate in,” she said at the time.
Yellen on the debt ceiling deal
Yellen also told lawmakers that she is “relieved” that they “took action to address the debt limit in time.”
“But while we were able to avoid default, the United States once again came dangerously close to the line. This cannot be normalized as the way we do business in Washington,” she said.
The debt ceiling talks dragged on for months before lawmakers eventually reached a deal to suspend the debt limit for two years. Such last-minute action “hurts our global leadership and credibility on the world stage,” Yellen said.
Several Republican lawmakers argued near-default could have been avoided had President Joe Biden started negotiation talks with Republicans earlier. Some also took issue with Yellen revising her assessment of when the US would default on its debt from June 1 to June 5.
Yellen said the original early June estimate was made under “considerable uncertainty” regarding the Treasury’s finances in the months ahead.
— CNN’s Jessie Yeung contributed to this report.
