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Janet Yellen's Visit to China Signals Higher-Level Communication Between US and China
Increase in High-Level Communication Between US and China
U.S. Treasury Secretary, Janet Yellen, has become the second member of the U.S. Cabinet to visit China in a month, indicating an increase in high-level communication between the two countries. Additionally, John Kerry, the special presidential envoy for climate, is also planning to visit China in the near future. The multiple visits mark a significant shift from earlier this year, when geopolitical tensions had strained relations between the two nations.
Geopolitics Impacting the Market Earlier This Year
The earlier part of the year saw a negative impact on the market due to geopolitical tensions between the US and China. However, Yifan Hu, the regional chief investment officer at UBS Global Wealth Management, expressed optimism, stating that as long as there are talks and communication between China and the US, the market will adapt to this new normal. This indicates that market performance is expected to become less volatile.
Official Statements Indicate Plans for Further Talks
Both the US and Chinese sides have released official statements indicating their intentions to hold further talks. China's Ministry of Finance emphasized the importance of strengthening communication and exchanges despite existing differences between the two nations. During the meetings, the Chinese side requested the removal of tariffs on Chinese goods and urged the US to stop pressuring Chinese companies.
The Bilateral Relationship Remains Unimproved
Although there is an increase in communication, the bilateral relationship between the US and China has not significantly improved. China recently announced forthcoming export controls on two metals used in semiconductor manufacturing, and the US is considering investment restrictions on high-end Chinese technology. However, Yellen emphasized that any potential curbs on US outbound investments would be narrowly targeted.
Importance of Greater Communication in Setting Boundaries
Janet Yellen stated in an interview that the purpose of her visit to China was to prevent unintended escalatory actions that could harm the economic relationship between the two countries. The lack of contact between US and Chinese officials during the pandemic highlighted the importance of establishing deep and frequent contacts. Yellen believes that her trip has been successful in creating opportunities for better communication at staff levels.
Positive Meetings with Chinese Officials
During her visit, Yellen met with people close to Chinese President Xi Jinping, including recently promoted Premier Li Qiang. The meetings were described as constructive and substantial breakthroughs in terms of interaction and substance. Yellen spent a total of 10 hours in talks with Chinese officials, including Finance Minister Liu Kun and Pan Gongsheng, the party secretary at the People's Bank of China. The meetings aimed to establish a deeper understanding between the two countries.
Normalization of Direct Communication as a Step Towards Stability
Visits and meetings between high-level officials from both the US and China are expected to continue in the coming months. While one meeting may not yield a breakthrough, the process of normalization of direct communication can contribute to maintaining a fragile stability. As there is a year and a half left under the Biden administration, it is crucial to establish a senior-level diplomacy that becomes a natural element of managing the bilateral relationship between the two countries.
Conclusion: Implications for New Business Amid Increased US-China High-Level Communication
New Business Opportunities Amidst Reduced Market Volatility
The recent increase in high-level communication between the US and China, highlighted by Janet Yellen's visit, brings potential positive impacts for new businesses. The improved dialogue between the two nations is expected to lead to reduced market volatility, providing a more stable environment for business operations. As talks and communication continue, the market is likely to adapt to this new normal, presenting better conditions for attracting investment and fostering growth.
Expectations for Trade and Investment Policy Changes
Official statements from both sides indicate plans for further talks, suggesting potential changes in trade and investment policies. The Chinese request for tariff removal and US pressure on Chinese companies may result in adjustments that can benefit new businesses. As these discussions progress, it is important for entrepreneurs to stay informed about potential policy shifts and explore how they could create new opportunities for market entry or expansion.
Establishing Reliable Communication Channels for Business Stability
Janet Yellen's visit underscores the importance of deep and frequent contacts between US and Chinese officials. This push for greater communication aims to prevent unintended escalations that can disrupt the economic relationship between the two countries. For new businesses, this shift signifies the establishment of reliable communication channels, which can help in setting clear boundaries and mitigating potential risks or uncertainties associated with geopolitical tensions.
A Step Towards Future Opportunities
While the bilateral relationship between the US and China remains unimproved overall, the normalization of direct communication is a positive step. Continued visits and meetings between high-level officials indicate a desire to foster stability and find common ground. As a new business, this presents an opportunity to position oneself strategically and work towards future collaborations or partnerships that can benefit from improved US-China relations.
In conclusion, the increased high-level communication between the US and China, exemplified by Janet Yellen's visit, offers potential benefits for new businesses. Reduced market volatility, potential policy shifts, reliable communication channels, and the opportunity to build future partnerships are key takeaways. As this dialogue continues, new businesses should monitor developments and adapt their strategies to leverage the evolving US-China relationship for their growth and success.
Article First Published at: https://www.cnbc.com/2023/07/10/yellens-latest-trip-helps-set-a-new-normal-for-us-china-ties.html.svg)
