Trade War

Newsletter 182 - September 24, 2023

Welcome to the 182nd edition of Trade War.

In a move to lessen tensions, the US and China announce new economic and financial dialogue. Top European trade negotiator says relations with China ‘very imbalanced.’

Kissinger calls for cooperation on regulating artificial intelligence. And AI industry in China is exploiting vocational student youth.

Purge of Xi-appointed officials shows leadership disarray. China’s economy could be facing bigger challenges than even Japan did. And youth unemployment is being driven by skewed policy priorities that favor investment over services.

Renowned Uyghur scholar gets life sentence. Beijing cracks down on language diversity. And the party’s monopoly over history is key to its control.

New economic and financial dialogue hints at thaw

In a move designed to lessen tensions, the U.S. and China have announced the creation of working groups on economic and financial issues.

Led by U.S. Treasury Secretary Janet Yellen and Chinese Vice Premier He Lifeng, the groups will focus on areas of concern between the countries, including technology and investment restrictions, tariffs, and the treatment of companies operating in each other’s markets.

“These are issues where the U.S. and China clearly see mutual benefit to mitigating conflict and managing the bilateral relationship in a constructive way,” Eswar Prasad, a former head of the International Monetary Fund’s China division, told the New York Times. “These working groups might also help in maintaining dialogue on such issues even if geopolitical fissures between the two sides continue to deepen.”

The two groups will meet on “a regular cadence” and “provide ongoing structured channels for frank and substantive discussions on economic and financial policy matters,” the Treasury Department said in a statement. Secretary Yellen travelled to China in July, one of four senior administration officials to visit so far this year.

China and U.S. officials will “hold regular and ad-hoc meetings to strengthen communication and exchanges on economic and financial issues,” China’s Ministry of Finance said.

The new framework “is notably less extensive than the bilateral forums earlier this century, when gatherings featured multiple cabinet members and spanned a wide array of subject matters,” reports Bloomberg News.

As Bloomberg notes, the latest agreement is far less ambitious than the U.S.-China Strategic Economic Dialogue, or SED talks, that were held for many years under former presidents George W. Bush and Barack Obama, before finally being discontinued by Trump.

Here is the full announcement by the U.S. Treasury Department and the announcement from China’s Ministry of Finance, on the new working groups.

And here is a 2007 SED announcement describing that dialogue as an “effective framework for addressing issues of mutual concern,” after it was promulgated a year earlier by Bush and former Chinese president Hu Jintao, a time when there was much more optimism about U.S.-China relations.