“This speech by the secretary of the US Treasury aims to find a common ground with China, in light of the increasing geopolitical power of China across the global economy, where the US ‘soft power’ has been diminishing considerably, owing to – among other factors – the ongoing de-dollarization process that a number of Asian, African, as well as Latin American countries have been entering into recently," Sergio Rossi, professor of macroeconomics and monetary economics at the University of Fribourg, Switzerland, told Sputnik.
"Janet Yellen is aware of the fact that the US administration has lost both its financial and geopolitical powers to steer the global economy in its own interests, and her speech is addressed to China and, more largely, to the BRICS member countries, with the intention to give rise to a multipolar international monetary regime where the US dollar will still have a major role to play, but only within a rather little part of the global economy, also as a result of the increasing fragmentation of globalization, due to the COVID-19 pandemic crisis and the energy crisis that is currently affecting several so-called advanced economies negatively."
On April 20, Yellen delivered a speech on US-China economic relations at Johns Hopkins University’s School of Advanced International Studies. She insisted that "China’s economic growth need not be incompatible with US economic leadership," adding that Washington does not seek to "decouple" its economy from China's.
The Treasury secretary went on saying that the Biden administration’s economic strategy is focused on investing in American infrastructure, clean energy, and technology manufacturing, "not suppressing or containing any other economy." Yellen further called on Beijing to cooperate with Washington in order to tackle global challenges, including climate change and the indebtedness of countries.
Limits on US Investments & EU Chips Act
It appears, however, that Yellen is extending the olive branch to China with tongue in cheek: earlier this week, the US mainstream media reported that the Biden administration has been working on unprecedented rules aimed at curtailing US investments in the People's Republic. US officials have already started briefing industry groups like the Chamber of Commerce on President Joe Biden's forthcoming executive order, which will require companies to notify the government of new investments in Chinese tech firms and bar deals in critical sectors like semiconductors.
Furthermore, the White House apparently pressured its European allies to pass similar legislation earlier this week. In addition, the US is escalating tensions over Taiwan by stepping up military aid to the island, which is considered by China as an inalienable part of the country.
Yellen's remarks come in sharp contrast to the overall China policy pursued by the Biden administration, according to Rossi.
"These economic policy decisions are indeed a last-minute attempt to curb the declining trend of the US economy, in regard to both commercial and financial transactions across the world, trying thereby to limit economic growth as well as development of China with a series of limitations that, as a matter of fact, contrast with the basic principles of a free-market economy – which the USA claims to be," said Rossi.
"In short, the US has adopted a doubtful strategy that can be phrased as follows: 'Do what I say but not what I do.' The current geopolitical tensions between Eurasian countries are induced by this strategy of the United States, but will not enable this country to recover its hegemonic power across the global economy, because, now, there are some other major players that can affect the path of such an economy – also in light of their collaboration and cooperation with regard to financial integration and multilateral trade agreements, which emasculate the use of the US dollar as a weapon to induce the world economy operating in the interests of the United States," he continued.
US Trying to Calm Tensions With 'Friendly' Rhetoric
BRICS – an acronym for five developing nations: Brazil, Russia, India, China, and South Africa – are currently pushing for de-dollarization and creating a common currency. Likewise, Brazil and Argentina are mulling over a common currency for Mercosur, the Southern Common Market consisting of major South American economies. The push for de-dollarization and shifting to national currencies in settling trade deals, including for energy commodities, has been supported by Middle Eastern and Asian players. The Association of Southeast Asian Nations (ASEAN) has gone even further by seeking to reduce dependence not only on the greenback, but also on the euro, yen, and British pound in financial transactions.
According to US economists, the de-dollarization trend seems especially disturbing since shrinking demand for the greenback could complicate Washington's ability to print dollars to pay its bills. They noted that as long as the dollar remains the dominant reserve currency and is used to settle most international payments, US deficits are financed by countries holding their foreign reserves in US dollar securities. To complicate matters even further, the US is still trying to curb inflation and galloping prices through the Federal Reserve's aggressive rate hikes, which have backfired on US regional banks.
"The collapse of three Californian banks, the financial turmoil in the crypto-assets area, mounting inflationary pressures and the US federal government debt issues have shown that the US economy actually is moving along a dangerous downward path, also with respect to the better economic performance of its main competitors across the global economy, notably China, which is quite reluctant in continuing to finance the US’ ‘twin deficits,’ that is, both the fiscal and the trade deficits of the US economy," Rossi pointed out.
According to the expert, the US economic problems have prompted the US administration, and particularly the Treasury secretary, to address these issues with a series of "open-mouth operations" intending to "improve the political relationships with the other major players in the global economy."