Global Courant
The Fed’s rate hikes have made it more attractive for businesses and households to send money from China and invest it in the United States, despite Beijing’s tight limits on foreign money movements.
China pledged three years ago as part of its Phase 1 trade deal with the United States not to seek a trade advantage by lowering the value of its currency. But the Biden administration’s options may be limited if China does allow its currency to weaken.
Global debt
China has provided more than $500 billion to developing countries through its loan program, making it one of the world’s largest creditors. Many of those borrowers, including several African countries, have struggled economically since the pandemic and are at risk of default on their debts.
The United States, along with other Western countries, has been pressuring China to allow some of those countries to restructure their debt and reduce the amount they owe. But for more than two years, China has been insisting that other creditors and multilateral lenders absorb financial losses as part of any restructuring. This has slowed down the loan repayment process at a time when millions of people in developing countries are facing food insecurity and at risk of further poverty.
In June, international creditors, including China, agreed a debt relief plan with Zambia that would provide a grace period for its interest payments and extend the maturities of its loans. The scheme did not require the World Bank or the International Monetary Fund to write off debt, and gave global policymakers like Ms Yellen hope for similar debt restructuring in poorer countries.
Human rights and national security issues
Tensions over national security and human rights have created an atmosphere of mutual mistrust and have spilled over into economic relations. The flight of a Chinese surveillance balloon across the United States this year has deeply alarmed the American public, and members of Congress have urged the administration to reveal more of what they know about the balloon. Biden’s recent labeling of China’s leader, Xi Jinping, as a “dictator” also confused Chinese officials and state media.
US officials remain concerned about human rights abuses in China, including the suppression of the Hong Kong democracy movement and the detention of mostly Muslim ethnic minorities in the Xinjiang region of northwestern China. A senior Treasury Department official, who spoke on condition of anonymity ahead of Ms Yellen’s trip, said the United States had no intention of shying away from its human rights stance at the rallies in China.
Chinese officials continue to protest the various sanctions the United States has issued against Chinese companies, organizations and individuals for threats to national security and human rights violations, including sanctions against Li Shangfu, the Chinese Defense Minister. The Chinese government has cited those sanctions as the reason for its rejection of high-level military dialogues.
