{"id":22426,"date":"2023-06-14T06:48:31","date_gmt":"2023-06-14T10:48:31","guid":{"rendered":"https:\/\/ifintechworld.com\/investing\/yellen-says-decoupling-from-china-would-be-disastrous\/"},"modified":"2023-06-14T06:48:33","modified_gmt":"2023-06-14T10:48:33","slug":"yellen-says-decoupling-from-china-would-be-disastrous","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=22426","title":{"rendered":"Yellen Says Decoupling from China Would Be ‘Disastrous’"},"content":{"rendered":"
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Treasury Secretary Janet Yellen said Tuesday that economic partnerships between the U.S. and China should be preserved, although with safeguards, even as U.S. lawmakers have been seeking additional penalties and sanctions against China for actions deemed to be a security threat to the U.S. <\/p>\n

Yellen made the comments in her annual appearance before the House Financial Services Committee to discuss the international financial system and seek continued authorization to participate in lending funds to developing countries. The conversation with lawmakers covered a number of international and domestic concerns, including growing Chinese influence over global trade and monetary policy, recent U.S. bank failures, and the U.S. debt ceiling.\u00a0<\/p>\n

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In her written remarks, Yellen noted that investment in international financial institutions is a \u201ccore\u201d way the U.S. engages with emerging markets and developing countries, and an \u201cimportant counterweight\u201d to China\u2019s influence in the world.<\/p>\n

Lawmakers noted issues with World Bank loan policies, particularly with regard to China, the world\u2019s second-biggest economy. The World Bank has approved $9.6 billion in funding for Chinese projects since 2016, even though the Bank is set up to lend money to low- and middle-income countries, Rep. Blaine Luetkemeyer (R-Mo.) pointed out Tuesday. <\/p>\n

Yellen told Congress that she doesn\u2019t believe China should qualify for World Bank loans. \u201cWe will not support or vote in favor of any world bank lending to China. We use our voting to oppose it. And we have certainly worked to convince other countries in the World Bank to cease funding,\u201d Yellen said.\u00a0<\/p>\n

Yellen noted that the U.S. government has countered China in a \u201ca broad range of ways,\u201d from export controls to sanctions and \u201cpotentially restrictions on outbound investment.\u201d<\/p>\n

Yet sanctions, she acknowledged, motivate some countries to seek alternative settlement instruments to the U.S. dollar, considered the world\u2019s reserve currency. \u201cit\u2019s not surprising that countries that are fearing they can be affected by our sanctions are looking for alternatives to the dollar,\u201d she said. \u201cIt\u2019s something that we simply have to expect.\u201d<\/p>\n

Regarding investment curbs, Yellen said Treasury is \u201clooking at potential restrictions on outbound investment that could pertain to private-equity firms that invest in Chinese firms with connections to their military. We are worried about potential national security risks.\u201d<\/p>\n

Yet the Treasury Secretary isn\u2019t in favor of severing the U.S. and Chinese economies, calling the idea of decoupling \u201ca big mistake\u201d and noting that Americans benefit greatly from access to cheaper products, healthy competition, and faster innovation through the current relationship with China. \u201cThis is a very valuable interaction,\u201d she said. \u201cIt would be disastrous for us to attempt to decouple from China. De-risk, yes. Decouple? Absolutely not.\u201d<\/p>\n

While international monetary policies were a focus of the hearing, Yellen addressed the failures in March of Silicon Valley Bank and
\n Signature Bank,<\/span>
\n and the subsequent collapse, in May, of
\n First Republic Bank.<\/span>
\n She deemed bank regulators\u2019 actions to shore up the collapsing banks in March a \u201csuccess.\u201d<\/p>\n

\u201cI believe it stopped contagion and stabilized our banking system, and it was a very dangerous moment,\u201d Yellen said. <\/p>\n

While confirming that she believes the U.S. banking system is well capitalized, she said that in cases where some of the bank supervisory standards were relaxed, \u201cit\u2019s appropriate, and the president thinks it\u2019s appropriate\u2026to revisit some of the changes.\u201d<\/p>\n

Yellen chastised lawmakers over the recent debt-limit negotiations, saying the U.S. \u201conce again came dangerously close to the line.\u201d Republicans on the committee expressed frustration around the lack of transparency regarding when the Treasury Department expected the debt ceiling to be breached, and questioned whether the so-called X date had been politicized.<\/p>\n

The Treasury Secretary pushed back on this characterization. \u201cI want to insist that there was nothing whatsoever about the advice that I gave to Congress that was political,\u201d Yellen said, adding that on June 2, the day after Congress raised the debt ceiling, the Treasury balance declined to $23 billion. Yellen said that \u201cmay sound like a lot of money, but it\u2019s absolutely completely insufficient.\u201d\u00a0<\/p>\n

Given the government\u2019s now-increased borrowing capacity, there have been worries that the Treasury will spark market volatility by issuing a significant amount of new Treasuries quickly. Noting that it is the Treasury\u2019s obligation to rebuild the department\u2019s balance to \u201ca safe and appropriate level,\u201d Yellen said the department will be issuing a \u201csubstantial\u201d quantity of Treasury bills and cash-management bills in the coming months.\u00a0<\/p>\n

Yellen said the Treasury had consulted widely with market participants about how to rebuild levels in a way that minimizes the cost to the federal government and avoids market disruption to the extent possible. \u201cAs we build our balance, we will certainly be careful to see if there are impacts or market disruption,\u201d she said.<\/p>\n

Write to Megan Leonhardt at megan.leonhardt@barrons.com<\/p>\n<\/p><\/div>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Treasury Secretary Janet Yellen said Tuesday that economic partnerships between the U.S. and China should be preserved, although with safeguards, even as U.S. lawmakers have been seeking additional penalties and sanctions against China for actions deemed to be a security threat to the U.S. Yellen made the comments in her annual appearance before the House […]<\/p>\n","protected":false},"author":1,"featured_media":22427,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"video","meta":{"footnotes":""},"categories":[239],"tags":[83],"class_list":["post-22426","post","type-post","status-publish","format-video","has-post-thumbnail","hentry","category-investing","tag-featured","post_format-post-format-video"],"yoast_head":"\nYellen Says Decoupling from China Would Be 'Disastrous' | iFintechWorld<\/title>\n<meta name=\"description\" content=\"Treasury Secretary Janet Yellen said Tuesday that economic partnerships between the U.S. and China should be preserved, 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