U.S. Treasury Secretary Janet Yellen is headed to a China determined to avoid open conflict with the United States, yet the world’s two largest economies still appear to be hashing out the rules on how to compete against each other.

There are tensions over Chinese government support for the manufacturing of electric vehicles and solar panels, just as the U.S. government ramps up its own aid for those tech sectors. There are differences in trade, ownership of TikTok, access to computer chips and national security — all of them a risk to what has become a carefully managed relationship.

The 77-year-old Yellen, a renowned economist and former Federal Reserve chair, laid out to reporters the issues that she intends to raise with her Chinese counterparts during her five-day visit. Ms. Yellen is headed to Guangzhou and Beijing for meetings with finance leaders and state officials. Her engagements will include Vice Premier He Lifeng, Chinese Central Bank Governor Pan Gongsheng, former Vice Premier Liu He, leaders of American businesses operating in China, university students and local leaders.

Ms. Yellen, speaking to reporters Wednesday during a refueling stop in Alaska en route to Asia, said her visit would be a “continuation of the dialogue that we have been engaged and deepening” ever since U.S. President Joe Biden and Chinese President Xi Jinping met in 2022 in Indonesia. She noted that it would be her third meeting with China’s vice premier.

Ms. Yellen recently accused China of flooding global markets with heavily subsidised green energy products, possibly undercutting the subsidies the U.S. has provided to its own renewable energy and EV sector with funds provided by the Democrats’ Inflation Reduction Act. She said she intends to repeat her concerns to Chinese officials that they’re flooding the global market with cheap solar panels and EVs that thwart the ability of other countries to develop those sectors.

“We need to have a level playing field,” Ms. Yellen told reporters. “We’re concerned about a massive investment in China in a set of industries that’s resulting in overcapacity.”

Ms. Yellen didn’t rule out taking additional steps to counter Chinese subsidies in the green energy sectors, adding, “It’s not just the United States but quite a few countries, including Mexico, Europe, Japan, that are feeling the pressure from massive investment, in these industries in China.”

The Treasury secretary’s travels come after Mr. Biden and Mr. Xi held their first call in five months on Tuesday, meant to demonstrate a return to regular leader-to-leader dialogue between the two powers. The leaders discussed Taiwan, artificial intelligence and security issues.

The call, described by the White House as “candid and constructive,” was the leaders’ first conversation since their November summit in California, which renewed ties between the two nations’ militaries and enhanced cooperation on stemming the flow of deadly fentanyl and its precursors from China.

Still, it appears to be difficult for the two countries to strike a balance between competition and antagonism.

For instance, Mr. Xi last week hosted American CEOs in Beijing to court them on investing in China. Meanwhile, Mr. Biden last August issued an executive order that instructed an inter-agency committee, chaired by Ms. Yellen, to closely monitor U.S. investment in China related to high-tech manufacturing.

Jude Blanchette, a China expert at the Center for Strategic & International Studies, said, “the Biden administration’s efforts over the last year to stabilize the relationship are clearly working, but the main friction points all remain unresolved and will likely challenge the relationship for the foreseeable future.”

“For the time being, a managed rivalry’ might be the best we can hope for, given the potentially catastrophic consequences of the relationship really going off the rails,” he said.

Ms. Yellen last week said China is flooding the market with green energy that “distorts global prices,” and plans to tell her counterparts that Beijing’s increased production of solar energy, electric vehicles and lithium-ion batteries poses risks to productivity and growth to the global economy.

China began to broaden its presence in the global economy more than two decades ago, exporting cheap goods that appealed to U.S. consumers at the expense of factory jobs in many of those consumers’ hometowns. Research by the economists David Autor, David Dorn and Gordon Hanson into what’s known as the “China Shock” led to the steady demise of many factory towns, and in some cases led to greater political discontent.

Still, some experts see a benefit in an economic showdown to produce green products.

Shang-Jin Wei, a professor of Chinese business at Columbia University, says that a subsidy war could ultimately help consumers in both countries buy more climate-friendly products, which is an aim of the Biden administration.

“In contrast, a U.S. tariff on EV imports could raise the price of EVs in the U.S. and is therefore counterproductive for the purpose of inducing a green transition.”

Ms. Yellen’s trip will run from April 4 to 9. It’s intended as a follow-up to Ms. Yellen’s travel to China last July, which resulted in the launch of a pair of economic working groups between the two nations’ finance departments to ease tensions and deepen ties.

But this visit falls in an election year, where tough talk on China has increased by Democrats and Republicans — who criticize Chinese ownership of popular social media app TikTok, the nation’s censorship and human rights record and hold a deep mistrust over recent acts of espionage such as hacking and the use of a spy balloon.

Scheherazade S. Rehman, a professor of International Business and Finance and International Affairs at George Washington University, said while “it’s an election year, so all the rhetoric is going to be sharper, the U.S and China are in a symbiotic trading relationship and ultimately need each other.”

China is one of the United States’ biggest trading partners, and economic competition between the two nations has increased in recent years. Yellen stressed Wednesday that the United States has no interest in decoupling from China.

China’s support of Russia as it continues its invasion of neighboring Ukraine is another issue that will come up during the meetings. As the U.S. and its allies sanction Russian officials and entire sectors of the Russian economy, like banking, oil production and manufacturing, trade between China and Russia has increased.

An ambitious 2021 agreement by more than 140 countries and territories to weed out tax havens and force multinational corporations to pay a minimum tax has been weakened by loopholes and will raise only a fraction of the revenue that was envisioned, a tax watchdog backed by the European Union (EU) has warned.

The landmark agreement, brokered by the Organization for Economic Cooperation and Development (OECD), set a minimum global corporate tax of 15%. The idea was to stop multinational corporations, among them Apple and Nike, from using accounting and legal maneuvers to shift earnings to low- or no-tax havens.

Explainer | What is a global minimum tax and what will it mean?

“Those havens are typically places such as Bermuda and the Cayman Islands where the companies actually do little or no business. The companies’ manoeuvres result in lost tax revenue of $100 billion to $240 billion a year,” the OECD has said.

According to the report, being released on Monday by the EU Tax Observatory, the agreement was expected to raise an amount equal to nearly 10% of global corporate tax revenue. Instead, because the plan has been weakened, it says the minimum tax will generate only half that — less than 5% of corporate tax revenue.

Much of the hoped-for revenue has been drained away by loopholes, some of them introduced as the OECD has been refining details of the agreement, which has yet to take effect. The watchdog group estimates that a 15% minimum tax could have raised roughly $270 billion in 2023. With the loopholes, it says, that figure drops to about $136 billion.

Over the summer, the OECD agreed to delay for at least a year — until 2026 — a provision that would have let foreign countries impose additional taxes on U.S. multinational companies that failed to pay at least a 15% rate on their overseas earnings.

The EU Tax Observatory noted that even under the rules of the 2021 agreement, companies would maintain some ability to evade taxes. Companies that have tangible businesses — factories, warehouses, stores and offices — operating in a particular country, for example, could continue to pay a tax rate below 15%. That carveout, the EU Tax Observatory warned, could “give firms incentives to move production to countries with tax rates below 15%.” “This risks exacerbating the race-to-the-bottom with corporate income tax rates,” it said.

Another loophole lets countries offer tax credits, for such things as conducting research and investing in local factories, that can reduce companies’ tax rates below the 15% mark and still comply with the 2021 agreement.

The Tax Observatory also expressed concern that the race by governments to grant tax breaks for green technologies to fight climate change “raises some of the same issues as standard tax competition. It depletes government revenues.”

“It also risks increasing inequality by boosting the after-tax profits of shareholders, who tend to be towards the top of the income distribution,” it said.

The EU Tax Observatory isn’t calling for an outright ban on green-technology subsidies. But it is urging governments to consider other policies to offset the financial gains to the wealthy from such tax breaks.

The group said that multinational corporations shifted $1 trillion — 35% of the profits they earned outside their home countries — to tax havens. American companies account for about 40% of such global profit shifting.

Last week, U.S. Treasury Secretary Janet Yellen said an agreement on a tax on companies that have no physical presence in a country but that earn profits there, such as through digital services, wouldn’t be finalised until 2024.

“There are some matters that are important to the United States and other countries that remain unresolved — open issues that still must be resolved before the treaty can be signed″ she said after meeting with European Finance Ministers.

The EU Tax Observatory is run by Gabriel Zucman, a leading economist and tax-and-inequality researcher of the Paris School of Economics and the University of California, Berkeley. Its report is based on the work of more than 100 researchers around the world who often work with government tax agencies. It draws upon new sources of data on multinational corporate finances and offshore wealth held by corporations.

Also read | Global pact on minimum corporate tax of 15%

Despite its criticisms of what has happened to the minimum tax, the EU Tax Observatory praised a separate effort to stop the wealthy from dodging taxes. In 2017, tax authorities around the world began exchanging taxpayer information from financial institutions to better enforce tax laws. The results, essentially ending bank secrecy, have been dramatic, the Tax Observatory found.

Until the “automatic information exchange,’’ was introduced, it said, virtually all wealth that the world’s rich held offshore went untaxed. Now, only 25% escapes taxes.

Still, the group says, “the effective tax rates of billionaires appear significantly lower than those of all other groups of the population’’ because the richest use tax-avoidance schemes. In the United States, it says, billionaires pay an effective average tax rate of 23%, including all taxes at all levels of government. The poorest 10% of Americans pay more – 25.6%.

The EU TAX Observatory is calling for a 2% global tax on billionaires’ wealth, a proposal it says would raise $250 billion annually from fewer than 3,000 people.

Janet Yellen, United States Secretary of Treasury.
| Photo Credit: AP

The U.S. Treasury Department and China’s Ministry of Finance launched a pair of economic working groups on Friday in an effort to ease tensions and deepen ties between the nations.

Led by Treasury Secretary Janet Yellen and Vice Premier He Lifeng, the working groups will be divided into economic and financial segments.

The working groups will “establish a durable channel of communication between the world’s two largest economies,” Ms. Yellen said in a series of tweets detailing the announcement. She said the groups will “serve as important forums to communicate America’s interests and concerns, promote a healthy economic competition between our two countries with a level playing field for American workers and businesses.”

The announcement follows a string of high-ranking administration officials’ visits to China this year, which sets the stage for a possible meeting between President Joe Biden and his Chinese counterpart, Xi Jinping, in November at an Asia-Pacific economic conference in San Francisco.

China is one of the United States’ biggest trading partners, and economic competition between the two nations has increased in recent years. The two finance ministers have agreed to meet at a “regular cadence,” the Treasury Department said in a news release.

Ms. Yellen, along with other Biden administration officials, traveled to China this year after the Democratic president directed key senior officials to “maintain communication and deepen constructive efforts after he met with Xi in Bali last year.

The groups’ launch also comes after Secretary of State Antony Blinken met with China’s vice president on Monday on the sidelines of the U.N. General Assembly.

Working groups between the U.S. and China are not a new creation.

Reps. Rick Larsen, D-Wash., and Darin LaHood, R-Ill., set up a working group in 2005 between lawmakers in the two nations. And as recently as August, Commerce Secretary Gina Raimondo said she and Commerce Minister Wang Wentao promised to set up a working group of officials and private sector representatives to “seek solutions on trade and investment issues.”

Areas of disagreement between the nations have included tariffs, technology and China’s claims to self-governing Taiwan and large parts of the South and East China Seas.

Tensions between the countries reached a fever pitch earlier this year when a Chinese surveillance balloon was spotted traveling over sensitive U.S. airspace. The U.S. military shot the balloon down off the Carolina coast after it traversed sensitive military sites across North America. China insisted the flyover was an accident involving a civilian aircraft and threatened repercussions.

In April, Ms. Yellen called out China’s business and human rights abuses in Xinjiang, Hong Kong and Tibet while striking a conciliatory tone about how there is “a future in which both countries share in and drive global economic progress.”

Relations between the two countries have become further strained as the Communist nation has grown its ties with Russia despite its continued invasion into Ukraine.

The U.S. last year moved to block exports of advanced computer chips to China, an action meant to quell China’s ability to create advanced military systems including weapons of mass destruction, Commerce Department officials said last October.

New Delhi:

Finance Minister Nirmala Sitharaman on Friday held a bilateral meeting with US Treasury Secretary Janet Yellen and discussed G20 priorities.

The bilateral meeting took place a day ahead of the G20 Leadership Summit beginning on Saturday in Delhi.

Union Finance Minister Smt. @nsitharaman and United States Treasury Secretary Ms. @SecYellen met today in New Delhi against the backdrop of the #G20#LeadersSummit to be held in New Delhi on 9th-10th Sept. 2023.

FM Smt. @nsitharaman and Secretary Ms. @SecYellen discussed key… pic.twitter.com/ZggvucXKVA

— Ministry of Finance (@FinMinIndia) September 8, 2023

“FM Smt. @nsitharaman and Secretary Ms. @SecYellen discussed key #G20 priorities and bilateral cooperation between the two democracies to address pressing global economic and financial issues,” the finance ministry said in a post on X (formerly Twitter).

Yellen on Thursday had said Russia’s war against Ukraine has led to the needless loss of lives and stands in direct contradiction to everything the G20 stands for. “We will rally our partners to maintain our collective economic support for Ukraine as well as impose severe costs on Russia,” she had said in a post on X on Thursday.

“As @POTUS said last year, India is one of America’s indispensable partners. This will be my 4th visit to India in 10 months and our ties are stronger than ever. Bilateral trade between our two countries reached an all-time high last year, and we expect it to grow even further,” Yellen had said.

Ms Sitharaman also held a meeting with Nigerian Minister of Finance and Economy Adebayo Olawale Edun and Nigerian Minister of Budget and National Planning Abubakar Atiku Bagudu, against the backdrop of the G20 Leaders Summit.

The Ministers discussed issues of mutual interest in several areas.

“FM Smt. @nsitharaman conveyed India’s continued support to people of Nigeria in their development trajectory through Indian lines of credit, cooperation between Central Banks, collaboration with NITI Aayog @NITIAayog and exchange on best practices,” the finance ministry said in a post on X.

Minister Edun appreciated the rich contribution of Nigerian citizens of Indian origin in the development of the Nigerian economy, it said.

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)

U.S. Treasury Secretary Janet Yellen addresses the media, ahead of the G-20 Summit in New Delhi, on September 8, 2023.
| Photo Credit: Reuters

U.S. Treasury Secretary Janet Yellen said on September 8 she will work at the G-20 summit in India to build support to increase lending resources for the International Monetary Fund and the World Bank to help member countries deal with multiple global challenges, including new IMF quota resources.

Ms. Yellen said in prepared remarks at a news conference in New Delhi that she will seek to build G-20 support for an “equi-proportional” increase in IMF quota funds paid-in by member countries, which would increase IMF lending resources, but not immediately change its shareholding structure.

G-20 Summit Delhi 2023 September 8 Updates 

On Thursday, Treasury Under Secretary Jay Shambaugh said in Washington that an IMF quota increase that keeps voting power unchanged would speed more resources to countries under financial stress, while IMF shareholders could take more time to work out a complicated new shareholding formula that gives greater weight to dynamic emerging market economies such as India, China and Brazil.

Ms. Yellen also said the United States has asked the U.S. Congress for permission to lend $21 billion to IMF trust funds, including one for the poorest countries, which “desperately needs more resources.”

Ms. Yellen highlighted progress on efforts over the past year by the World Bank and other multilateral development banks to vastly expand lending resources and help tackle climate change, pandemics and other global crises.

Near-term balance sheet changes under consideration could unlock an additional $200 billion over the next decade, she said. More resources could come from medium-term steps recommended by a G20 capital adequacy review, including the use of callable capital that is pledged, but not paid-in, to back lending.

“Those are crucial additional resources for reducing poverty, advancing global health security and combating climate change,” Ms. Yellen said.

Ms. Yellen said she will bring up debt relief for poorer countries, a topic she highlights at every international meeting, particularly where the world’s largest bilateral lender, China, is present.

“We continue to support efforts to provide predictable, orderly and timely debt relief to countries, including under the [G20] Common Framework for Debt Treatment, where progress has been too slow,” Ms. Yellen added.

The U.S. Treasury chief also said she will work to strengthen international support for Ukraine at the G20 gathering, saying it was “critical that we continue to provide timely economic assistance” through such measures as the IMF’s $15.5 billion Ukraine loan program and the European Union’s proposed 50 billion-euro support package through 2027.

Due to the need to counteract food insecurity prompted by Russia’s withdrawal from a Black Sea grain deal, Ms. Yellen called for support for the G20’s Global Agriculture and Food Security program and the UN’s International Fund for Agricultural Development.

Washington:

US Secretary of the Treasury Janet L Yellen will participate in the G20 Leaders’ Summit from September 7 to September 10 in New Delhi, the White House (WH) said.

On her fourth visit to India in 10 months, Secretary Janet L Yellen will focus on strengthening the global economy and supporting low and middle-income countries by advancing the Multilateral Development Bank (MDB) evolution, debt restructuring, and the IMF’s Poverty Reduction and Growth Trust (PRGT).

“Secretary Yellen will continue to build momentum for the collective effort that she helped launched last October to evolve the multilateral development banks so the MDBs have the right vision, incentives, operational models and financing capacity to address critical global priorities like combatting climate change, addressing pandemics and global health security, and tackling fragility and conflict,” the WH said in a release on Thursday.

Treasury estimates that the MDBs as a system could unlock USD 200 billion over the next decade just from the measures already being implemented or under deliberation as part of this process – with the potential for even more if MDBs undertake some of the longer-term and more complex recommendations in the G20 Capital Adequacy Framework report, including on callable capital, according to the official release.

While in New Delhi, Secretary Janet L Yellen will continue to rally “America’s partners to maintain our collective economic support for Ukraine, including through contributions from across our coalition.” She will also highlight the importance of imposing severe costs on Russia and mitigating global spillovers, the release said.

“Secretary Yellen and our partners will work to address the consequences of Russia’s unprovoked war to global growth and poverty reduction, including through the price cap, which has been achieving its dual goals of reducing Russian revenue while keeping global energy prices stable, as well as efforts to strengthen global food security through the MDBs, leveraging multilateral tools such as the Global Agriculture and Food Security Program (GAFSP), and working towards a successful replenishment of the International Fund for Agricultural Development (IFAD),” the White House release said.

“Finally, Secretary Yellen will continue to deepen the US’ bilateral relationship with India. During her visit, Secretary Yellen will further this relationship by engaging with Indian counterparts and the Indian people to discuss common priorities like expanding our bilateral economic ties – as she discussed in remarks last November in New Delhi – and by cooperating on global challenges,” it said.

Secretary Janet L Yellen will also participate in engagements on the margins of the G20 and will hold bilateral meetings with counterparts. “Additionally, she will join the President for several of his engagements on the margins of the meetings,” the release added.

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)