Yellen: Decoupling of two economies would be 'disastrous'

US Treasury Secretary Janet Yellen said Thursday that a decoupling of the American and Chinese economies would have "disastrous effects".

"A full separation of our economies, or an approach in which countries including those in the Indo-Pacific are forced to take sides, would have significant negative global repercussions," Yellen said. "We have no interest in such a divided world and its disastrous effects."

She made the remarks at the Asia Society in Washington 10 days before leaders of the Asia-Pacific Economic Cooperation (APEC) countries gather in San Francisco for an annual meeting Nov 11-17.

"First, the United States began as an Atlantic nation, but we have long been a Pacific one as well," Yellen said in the speech. "We see this clearly in California, where President Biden and I will head later this month to host APEC Economic Leaders' Week…

"In California, as elsewhere across the country, our ties to Asia are evident — from the influence of the over half of California's immigrant population arriving in the past decade who were born in Asia, to the competition and collaboration with Asia driven by Silicon Valley over decades," she said.

"Second, the Indo-Pacific region is at the center of the 21st century global economy. The region contains half of the world's population, and it is generating about two-thirds of global growth," she said.

"As we look toward APEC later this month, let me state unequivocally: Claims that America is turning away from the Indo-Pacific are wholly unfounded. We are deepening our economic ties across the region, with tremendous potential benefits for the US economy and for the Indo-Pacific," Yellen said.

The secretary highlighted what she called three US priorities that are "shaping an economic strategy in the region that is fit for this current moment: increasing trade and investment, bolstering our economic resilience, and cooperating on global challenges". She said the US approach to the region would be centered on "securing our national security interests and advancing human rights".

Yellen also said that the US sees economic engagement with the "Indo-Pacific" as "crucial to bolstering our supply chain security".

"Our critical supply chains are too vulnerable to risks, as the disruptions during the COVID-19 pandemic revealed," she said.

"Across sectors from auto parts to electronics, the US is importing more from key partners like India and Vietnam, as well as from Mexico, and is less dependent on one single country, in this case, China," Yellen said.

"It's natural that a richer country would less often serve as a base for final assembly. So, China was always expected to see shifts in its export patterns as it grew richer, just as Japan did in the 1980s," she said.

As Washington shifts its China policy through a string of economic measures that include tariffs and restrictions on technology exports and outbound investments, Beijing has accused the United States of stifling China's growth and curbing its rise.

The Center for Strategic and International Studies said last month, however, that US export controls have affected American industry in two major ways: the loss of market demand in China for leading-edge chips and their associated technologies, as well as retaliatory controls and sanctions by China.

"Additionally, the Chinese government has been working to convince domestic technology firms to source their inputs domestically rather than from US suppliers. This threat of designing-out US critical technological inputs threatens US industry en masse," said the analysis.

Nvidia CFO Colette Kress said in June that long-term restrictions on China will impact "our future business and financial results" and that the American semiconductor industry will suffer "a permanent loss of opportunities".

Like Nvidia, chip designer Advanced Micro Devices also relies on its massive consumer-chip sales to China to fund its research and development of data center technology.

Yellen also talked about her trip to Beijing in July, where she met with Chinese economic officials.

"The visit led to the launch of Economic and Financial Working Groups, which provide ongoing channels to discuss macroeconomic and financial policies, work towards specific goals, and ultimately put our relationship on a surer footing," she said, noting that each group recently met for the first time.

Lia Zhu in San Francisco and agencies contributed to this story.

Contact the writers at hengweili@chinadailyusa.com.