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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. US Treasury Secretary Janet

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Speaker 1: Yellen is wrapping up a high stakes visit to China.

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Speaker 2: Over the past week. I've had the opportunity to make

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Speaker 2: progress on issues that mattered to Americans.

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Speaker 1: It was her second trip to Beijing in nine months,

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Speaker 1: and improving the relationship between China and the US has

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Speaker 1: been and continues to be a huge focus for Yellen.

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Speaker 2: It's undeniable that the US China relationship is on a

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Speaker 2: stronger footing today than this time last year. And this

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Speaker 2: was not preordained. It was the direct result of President

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Speaker 2: Biden's guidance to me and his cabinet to intensifire diplomacy

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Speaker 2: with China.

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Speaker 3: It is an abnormally large role for treasure secretary in

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Speaker 3: diplomatic affairs.

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Speaker 1: That's Chris Condon, who covers economic policy for Bloomberg. He

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Speaker 1: traveled with Yellen to China.

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Speaker 3: She's taken very seriously abroad. She has a long history

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Speaker 3: of dealing with economic policymakers monetary policymakers all over the

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Speaker 3: world for many years, and she just has the chops.

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Speaker 1: While she was there to talk about opportunities for cooperation

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Speaker 1: between the world's two largest economies, she also didn't shy

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Speaker 1: away from addressing a major national security concern.

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Speaker 2: We continue to be concerned about the role that any firms,

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Speaker 2: including those in the PRC, are playing in Russia's military procurement.

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Speaker 2: I stress the companies, including those in the PRC, must

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Speaker 2: not provide material support for Rusch's war, and that they

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Speaker 2: will face significant consequences if they do.

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Speaker 1: On today's episode on the Ground in China with Janet

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Speaker 1: Yellen on what's likely to be her last visit there

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Speaker 1: as Treasury Secretary, from Bloemberg News, this is the big take.

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Speaker 1: I'm David Burrat. Janet Yellen's trip to China comes at

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Speaker 1: a calmer moment. Uncertainty during the Trump years strained the

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Speaker 1: US China relationship, and China's zero COVID policy compounded that.

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Speaker 1: Then there was the Chinese spy balloon found floating above

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Speaker 1: the United States. The US military shot it down just

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Speaker 1: over a year ago.

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Speaker 4: In the same way that the US was force respond,

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Speaker 4: China obviously is also force respond when it sees one

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Speaker 4: of its assets taken out at a sky like that

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Speaker 4: live on cable TV and on Twitter.

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Speaker 1: That's end a current who covers the global economy. He's

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Speaker 1: now based in Washington after a decade in Hong Kong.

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Speaker 4: I mean both sides were then just pushed into a corner.

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Speaker 4: It was always going to play out the way that

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Speaker 4: it did.

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Speaker 1: US China relations reached a new low after that incident,

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Speaker 1: and they stayed there for months.

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Speaker 4: There was no munications going on at any level, especially

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Speaker 4: in defense right and head of government level, and I

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Speaker 4: think both sides realize that they need to come together

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Speaker 4: here and try and get the basic comes lines reopen,

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Speaker 4: and that's what has been happening.

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Speaker 1: A key moment was late last year when President Biden

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Speaker 1: sat down with President She at a summit in California.

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Speaker 5: We're going to continue to preserve and pursue high level

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Speaker 5: diplomacy at the PRC in both directions, to keep the

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Speaker 5: lines of communication open, including between presidents She and me.

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Speaker 5: He and I agreed that each one us could pick

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Speaker 5: up the phone called directly and we'll be heard.

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Speaker 1: Immediately, which is what happened a week ago ahead of

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Speaker 1: Janet Yellen's trip, the White House, says Biden and She

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Speaker 1: had a candid and constructive discussion on a range of issues.

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Speaker 4: Both sides agreed, you know, let's talk where we can cooperate,

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Speaker 4: where we can fairly modestly. That might be, of course,

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Speaker 4: an arcotics trade, maybe some more can climate change. But

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Speaker 4: underneath the surface, none of the big geostrategic competitive issues

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Speaker 4: have gone away. It's not like the US concerns over

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Speaker 4: China's competitive advantages have gone away now. As you remember,

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Speaker 4: while the President Trump years, we had the introduction of

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Speaker 4: a trade war, which came as a shock to the

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Speaker 4: global system. And this current administration has been pretty hokish,

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Speaker 4: as holkish as the previous administration when it comes to

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Speaker 4: keeping those tarerfs in place, imposing export restrictions, imposing investment restrictions,

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Speaker 4: and pushing back writ large against China, and of course

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Speaker 4: from China side, they are openly courting, if you want

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Speaker 4: to call it, the global South, and of course China

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Speaker 4: tries to peel off US allies where they can.

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Speaker 1: China also seems to be courting US business leaders in

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Speaker 1: a way they haven't for a while. You had President

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Speaker 1: She's sitting down for I guess ninety minutes with a

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Speaker 1: lot of US executives. What did you make of that meeting?

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Speaker 1: That overture from the Chinese government.

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Speaker 4: I think it's consistent with this idea that China is

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Speaker 4: trying to say they are open for business. Remember, sentiment

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Speaker 4: has turned so negative towards China on the security front,

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Speaker 4: but into COVID zero years, business is trying to operate

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Speaker 4: their global companies said, this is very difficult. There was

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Speaker 4: a lot of hassler around trying to navigate COVID zero policies,

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Speaker 4: and on the investor portfolio side of things, people can't

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Speaker 4: get their money out of there fast enough. That's not

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Speaker 4: all about geopolitics. It does reflect interstrates as well. But

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Speaker 4: the net result is sentiment is really negative towards China,

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Speaker 4: and I think the Chinese government now get this and

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Speaker 4: they are pushing a message that we are here, We're

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Speaker 4: open for business.

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Speaker 1: After the break, the concerns US business leaders asked Janet

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Speaker 1: Yellen to convey to her counterparts about how difficult it

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Speaker 1: is for US companies to compete with their Chinese rivals,

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Speaker 1: and how the Treasury Secretary is trying to maintain a

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Speaker 1: fragile stability ahead of a US presidential election that could

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Speaker 1: upend policies she's put in place. We're back before the break,

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Speaker 1: we were talking about how the US and China hope

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Speaker 1: to move forward after years of fraught relations. Conton covers

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Speaker 1: the Treasury Department for Bloomberg And when I caught up

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Speaker 1: with Chris, he was outside a bar Yellen was visiting

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Speaker 1: in Beijing, known for brewing beer with American hops.

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Speaker 3: To knocked back a cold one with Nicholas Birds, the

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Speaker 3: US ambassador, So that was kind of fun.

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Speaker 1: I asked him what Treasury Secretary Yellen hoped to achieve

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Speaker 1: on this trip.

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Speaker 3: Almost zero really in terms of this specific trip. They

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Speaker 3: really tried to frame it as part of a longer

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Speaker 3: process in which they're building relations that will prevent problems

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Speaker 3: from arising and possibly help address longer term issues that

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Speaker 3: they want to improve on. Also, I should say, importantly

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Speaker 3: help in trust some issues where they feel they have

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Speaker 3: a mutual interest, you know, like climate change or debt

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Speaker 3: relief for poor countries. But I'm going to use this

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Speaker 3: phrase a few times, a bit of a long game,

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Speaker 3: I think for yellow In personally, even she's searching for

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Speaker 3: a way that communicates to the Chinese why the US

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Speaker 3: is so upset about certain issues. Not just we are upset,

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Speaker 3: but why we are upset? And let's present kind of

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Speaker 3: evidence based case for it. She's an economist, that's the

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Speaker 3: way her brain thinks.

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Speaker 1: And she started this visit by gathering more evidence about

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Speaker 1: the challenges of doing business in China.

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Speaker 3: The very first meeting was not with any Chinese group,

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Speaker 3: with American and EU, Japanese and other executives from companies

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Speaker 3: that do business in China. She's kind of trying to

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Speaker 3: arm herself that it's not just about US complaints, but

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Speaker 3: in many other countries, and these businesses have these troubles.

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Speaker 1: The US has accused China of flooding the market with

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Speaker 1: cheap goods for years, and on this trip, Yellen hammered

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Speaker 1: the Chinese government about what's called industrial over capacity.

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Speaker 2: China is now simply too large for the rest of

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Speaker 2: the world to absorb this enormous capacity. Actions taken by

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Speaker 2: the pr seed today can shift world prices, and when

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Speaker 2: the global market is flooded by artificially cheap Chinese products,

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Speaker 2: the viability of American and other foreign firms is put

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Speaker 2: into question.

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Speaker 3: The thing I think that's funny about that is she

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Speaker 3: came here and she really gave them a tongue lashing,

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Speaker 3: and still they're rolling out the red carpet. They really

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Speaker 3: like her She's seen as a kind of wise elder

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Speaker 3: bit of a scholar, not a politician. She comes to

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Speaker 3: deliver a tough message, but still it's like, Okay, we

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Speaker 3: still like you, Jenny Yellan, and will still take you

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Speaker 3: on these VIP tours. And so she still gets the

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Speaker 3: great treatment even when she lashes them all day long

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Speaker 3: about over capacity.

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Speaker 1: And she didn't hold back. Chris says Yellen didn't just

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Speaker 1: hit China on over capacity. She also threatened to respond

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Speaker 1: more forcefully to any signed Chinese firms are helping Russia.

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Speaker 3: She leveled a very clear threat, I would say against

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Speaker 3: the Chinese financial institutions that if they are involved in

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Speaker 3: transactions cross borders, transactions that will help the Russians bolster

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Speaker 3: their military industrial base, which of course we're talking about

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Speaker 3: helping the war in Ukraine. She says, the Americans are

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Speaker 3: going to go after that, they would designate Chinese financial institution.

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Speaker 3: Now designation it sounds like, well, you know, what does

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Speaker 3: the US have to say about any of this. The

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Speaker 3: US has a very key power in this whole area,

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Speaker 3: and that is access to US dollars. To access US

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Speaker 3: dollars as a bank, you need either a branch in

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Speaker 3: the US, or a correspondent relationship with a bank in

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Speaker 3: the US that has an account in the FED unless

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Speaker 3: you get dollars. If you don't have that, as a

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Speaker 3: bank of any size anywhere in the world, it's almost

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Speaker 3: like a death sentence. Your clients will flee you very quickly.

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Speaker 3: So that's a very serious threat for her to level

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Speaker 3: the idea of designating or sanctioning a Chinese financial institution.

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Speaker 1: But Chris says Treasury Secretary Janet Yellen and her colleagues

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Speaker 1: recognize there's only so much they can do ahead of

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Speaker 1: the US presidential election in November. I ask Chris how

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Speaker 1: that affects Yellen's ability to broker deals, given how much

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Speaker 1: uncertainty there is about what will happen in just a

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Speaker 1: few months.

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Speaker 3: Well, I mean, this is just a question that has

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Speaker 3: to be asked. You know, if I talk about them

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Speaker 3: playing a long game, the Chinese can play a long game,

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Speaker 3: how does the US play a long game? I you know,

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Speaker 3: I think from Yellen's perspective, she thinks the only way

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Speaker 3: to make progress is to play a long game, and

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Speaker 3: she has to hope for the best. She plays her

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Speaker 3: part during her tenure. It's going to come to an

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Speaker 3: end in January. What can she do about that? She

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Speaker 3: can only pursue the path that she thinks will be

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Speaker 3: most effective and then hope for the best. Once she's

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Speaker 3: out of this job, We'll see what happens. I don't

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Speaker 3: want to leave you with time, you know, a cliche.

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Speaker 3: Time will tell, But you know, let's say, what will

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Speaker 3: happen on the US side. If Biden wins again, they'll

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Speaker 3: have a decent chance in continuing this path with them.

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Speaker 3: It will be a tough sledding at first, but they'll

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Speaker 3: have a chance. If it's a Trump administration, you know,

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Speaker 3: all bets are off, really not because I'm seeing that

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Speaker 3: they lack the capacity to continue this, but they just

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Speaker 3: simply may not lack the will to pursue this the

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Speaker 3: way that Yellen thinks is the best way to pursue it.

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Speaker 3: So there's not a really good answer to this this

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Speaker 3: and you know, we will have to wait and see.

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Speaker 1: Thanks for listening to The Big Take podcast from Bloomberg News.

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Speaker 1: I'm David Gera. This episode was produced by Jessica Beck.

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Speaker 1: It was edited by Caitlin Kenny and Chris Anstey. It

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Speaker 1: was mixed by Alex Sugia. Naomi Shaven is our senior producer.

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Speaker 1: Our senior editor is Elizabeth Ponso. The Cool Beemster Bore

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Speaker 1: is our executive producer. Sage Bauman is Bloomberg's Head of Podcasts.

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Speaker 1: Special thanks to Gerard de Pippo. Please subscribe and review

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Speaker 1: back tomorrow