Finance Chiefs Pledge More China-US Communication as World Bank Warns Recession 'Perilously Close'
© AP Photo / Kin Cheung
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In the highest-level meeting between American and Chinese officials since November, US Treasury Secretary Janet Yellen and Chinese Vice-Premier Liu He held discussions in Zurich, Switzerland, on Wednesday, on the sidelines of the annual World Economic Forum (WEF).
It was the first face-to-face meeting by leading economic officials from the world’s two largest economies in more than two years, and comes as China looks to recover from a year of poor economic growth, but as the world braces for a year in which the World Bank has predicted the globe will come “perilously close” to recession.
A US Treasury readout of the conversation described it as “candid, substantive, and constructive,” noting both sides agreed on the needs of the global economy for them to “further enhance communication around macroeconomic and financial issues.”
“They also agreed about the importance of sustainable development and that they would enhance cooperation on climate finance on a bilateral and multilateral basis, such as within the UN, G20, and APEC [Asia-Pacific Economic Cooperation], as well as through support for emerging markets and developing countries in their clean energy transitions,” the Treasury statement added.
Yellen added she was looking forward to traveling to China, as well as welcoming her Chinese counterparts in the US. The statement comes a day after the Biden administration confirmed US Secretary of State Antony Blinken would visit China in early February.
‘Managed Competition’
The meeting between Liu and Yellen was the highest-ranking meeting since US President Joe Biden and Chinese President Xi Jinping met on the sidelines of the G20 summit in Bali, Indonesia, in November. That meeting helped, in a limited way, to begin to heal some of the separation created by the provocative visit to Taiwan by then-US House Speaker Nancy Pelosi the previous August. China sees Taiwan as a wayward province and US support for the government there as interference in internal Chinese affairs.
18 January 2023, 11:44 GMT
However, Yellen’s meeting followed the script laid out by Biden in Bali, reflecting the US’ strategic orientation toward “great power competition” with China and Russia. Washington has said it sees Beijing as its chief rival economically, militarily, and ideologically in the 21st century, and has accused the socialist state of seeking to overturn the so-called “rules-based international order” in which the US calls the shots and other nations exist to serve US policy goals.
Biden has called his policy toward China “managed competition,” in which the US won’t write off the possibility of cooperating with Beijing where possible, such as efforts to fight climate change or to share information about contagious diseases.
Their meeting also came after Liu’s keynote speech at the World Economic Forum in Davos a day prior, in which he urged the world to “abandon the Cold War mentality” in comments clearly aimed at the United States and NATO.
17 January 2023, 15:53 GMT
“We have to abandon the Cold War mentality, try to understand the essence of things from the perspective of material duality, endeavor to build a community with a shared future for mankind, and join hands to respond to global challenges,” Liu said. “We believe that an equitable international economic order must be preserved by all of us.”
‘Perilously Close’ to Recession
The talks between Yellen and Liu, two prominent economists, also comes as the planet is bracing for a year in which the World Bank has predicted the global economy will come “perilously close” to a recession.
“A wrong policy move or a reversal in the positive data and we could see the global economy head into a recession in 2023,” Josh Lipsky, senior director of the Atlantic Council’s GeoEconomics Center, was quoted as saying in the American press. “Both countries have a shared interest in avoiding that scenario.”
While the US hasn’t yet released economic data on its gross domestic product for all of 2022 yet, economic forecasters are predicting real GDP growth will be about 2.0% year-on-year. China published its data earlier this week, showing a 2.9% GDP growth for the previous year - far below the 5.5% that economic planners had predicted.
However, for the coming year, things are expected to get even worse. The Conference Board predicted last week that the US will see just 0.2% GDP growth in 2023, following longstanding expectations of a recession or near-recession as businesses face increased pressure from low employment and rising interest rates.
At Davos, Liu expressed his confidence that the Chinese economy would “see a significant improvement” from the impact of a year of rolling COVID-19 lockdowns associated with the now-abandoned policy of Dynamic Zero Covid. While the lockdowns prevented substantial spread of the disease, they also hamstrung economic activity.
China’s policy shift has won the endorsement of prominent global economic thinkers, including WEF chief Borge Brende.
In an interview last week with Chinese media, Brende said the shift "will lead to stronger and more prosperous growth, even if this immediate situation is a bit challenging … Overall, for late 2023 and 2024, we're very optimistic on growth in China."
