China and the United States can avoid a “winner-take-all” economic rivalry, according to Treasury Secretary Janet Yellen, who struck a reassuring note at the outset of a fraught visit to Beijing.
“We seek healthy economic competition that is not winner-take-all but that, with a fair set of rules, can benefit both countries over time,” Yellen told Chinese Premier Li Qiang. “The United States will, in certain circumstances, need to pursue targeted actions to protect its national security. And we may disagree in these instances. However, we should not allow any disagreement to lead to misunderstandings that unnecessarily worsen our bilateral economic and financial relationship.”
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Li likewise adopted an optimistic posture, noting that “the moment you arrived at our airport and left the plane, we saw a rainbow.” That flattering tone made for a marked contrast with Qiang’s recent attempt to persuade European leaders to remain aloof from the United States amid a struggle for technological superiority, punctuated by occasional acrimonious outbursts and driven by mutual distrust.
“I think what we're seeing is a recognition on both sides, that we're in a competitive environment,” American Enterprise Institute senior fellow Zack Cooper told the Washington Examiner. “And so, while talks go on, each side is going to be taking actions that the other side objects to.”
The competitive dynamic has been on display throughout the week. Chinese officials unveiled new restrictions on gallium and germanium, a pair of critical minerals necessary for high-tech manufacturing.
“We don’t use it in huge quantities, but still it’s very relevant,” the European Commission’s Kerstin Jorna, the lead official for the European Union’s internal market, said Wednesday. “Gallium is for integrated circuits, in particular chips — essential. Germanium is for fiber optics and optics in general; 90% comes from China. [With respect to] Gallium, China is the only [source] in the world — so it's a single point of failure, if that doesn’t work — that produces primary gallium.”
Chinese officials have justified the export controls on the grounds that the metals “can be used for both military and civilian purposes,” as Chinese Foreign Ministry spokesman Wang Wenbin said Monday, moments before denouncing “the overstretch of national security concept and abuse of export control by a handful of countries."
Lest there be any doubt, Chinese state media also have encouraged international observers to regard the restrictions as a thinly-veiled act of retaliation for the U.S. and its allies curbing the regime’s access to advanced semiconductors and manufacturing equipment.
“Whether it is a precise counterattack against the discriminatory policies of the U.S., Japan, and the Netherlands toward China can be left for them to ponder,” the Global Times wrote in an unsigned editorial. “When the U.S. treats China in this way, it should not expect China to remain silent and not fight back; that is impossible.”
The geopolitical acrimony has precluded even more anodyne engagement between the United States and China. Yellen emphasized to Qiang that “there are also important global challenges where the United States and China have a duty both to our own countries and to the world to cooperate and show leadership.” She made that point as State Department officials prepared to convene a “coalition to address synthetic drug threats,” with a particular focus on the “illicit synthetic drug and fentanyl supply chains” that generally trace back to China.
“We’ve invited China. We don’t have any indication at the moment that they’re going to participate,” State Department Assistant Secretary Todd Robinson, who leads the Bureau of International Narcotics and Law Enforcement Affairs, told reporters on Thursday. “And part of the reason we’re trying to bring this coalition together is to engage other countries in their efforts against these supply chains and part of their responsibility is going to be engaging with the PRC ... we think having other countries engage with the PRC will eventually bear fruit.”
China suspended “counternarcotics cooperation” and other initiatives to coordinate against transnational crime last year in retaliation for then-Speaker Nancy Pelosi’s (D-CA) visit to Taiwan. And Chinese state media counterprogrammed the U.S. message with taunts about the recent discovery of cocaine at the White House.
“We should not anticipate any actual result from the promised investigation, as the White House, the home to US President and First Family, has long been no stranger to drugs,” the Global Times sneered. “Former presidents, such as Bill Clinton, George W. Bush and Barack Obama, admitted to smoking marijuana when they were younger. ... With illegal substances infiltrating the White House and US presidents setting an example as drug users, one wonders if the US can ever truly eradicate its drug crisis.”
Paradoxically, Beijing unveiled the critical metal export restrictions just weeks after Qiang, the Chinese premier, conducted a diplomatic tour of Western Europe on a mission to discourage the U.S. allies from heeding Washington’s call to “de-risk” their economic relationship with China.
“We know that there are some in the West calling for ‘de-risking’ and ‘reducing reliance,’ I think these two phrases are false propositions,” Qiang told a World Economic Forum audience late last month. “The government or any relevant organizations should not be in the way, to expand, politicize or turn the risks into an ideological fight. This would bring many problems.”
In a separate meeting with U.S. business leaders, Yellen didn’t hesitate to invoke the critical mineral export restrictions to drive home the need for Western companies to build “diversified supply chains” outside of China.
“We are still evaluating the impact of these actions, but they remind us of the importance of building resilient and diversified supply chains,” she said during a roundtable at the American Chamber of Commerce in China.
Yellen’s admonition underscores the degree to which Chinese President Xi Jinping’s regime has struggled to appeal to American allies as the rivalry between the United States and China intensifies.
“That's playing directly into U.S. hands [by demonstrating] why the U.S. is saying to a lot of other countries, ‘Look you need to diversify, because China could put on these kinds of restrictions,'” Cooper said. “So, in that way, I think it's pretty self-defeating, and it's going to end up doing a lot of damage to China in the long term.”
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A similar message is resonating in Brussels, where EU policymakers have acknowledged the need for "shorter delays for permitting" business operations to circumvent Chinese chokepoints in international supply chains.
"Time is money," European Parliament Vice President Nicola Beer told Jorna. "And here, time is also, geopolitically, very important."