US Treasury Secretary to warn Beijing of sanctions for arms supplies to Russia

U.S. officials say they expect "candid" discussions during Yellen's July 6-9 trip, after Beijing's abrupt announcement on Monday of controls on exports of some gallium and germanium products widely used in semiconductors, as well as a new counterespionage law, both seen as potentially harmful to U.S. firms.

No major breakthroughs are expected, but Yellen will push to open new lines of communication and coordination on economic matters, and stress the consequences of supplying lethal aid to Russia, U.S. officials say.

Chinese officials are concerned about the Biden administration's plans to limit U.S. companies' China investments and what they see as moves to decouple the two economies. China's economy is recovering more slowly than expected from COVID lockdowns and the job market is tough.

Yellen's long-anticipated trip follows weeks after Secretary of State Antony Blinken visited Beijing and agreed with Chinese President Xi Jinping that the two countries' rivalry should not veer into conflict, and amid a freeze in military communications between the two nations.

"There is no substitute for diplomacy. A phone call is just not the same," said one senior administration official.

Improving communication

Yellen is expected to focus on economic issues, but she will remind Chinese counterparts that any move to supply lethal aid to Russia - in violation of sanctions on Russia over its war in Ukraine - could trigger sanctions on Chinese entities, one senior administration official said.

"We routinely hear Chinese assurances that they will not deliver lethal assistance. We are holding them to that, and we'll continue to watch," the official said.

The U.S. believes China is unnerved by last month's mutiny by Russia's Wagner mercenary group and the weakness of the Russian military, the official said, but Beijing relies on a stable Russia for food and fuel.

Both Blinken and Yellen's visits are seen as critical to improving communication after the U.S. military shot down a Chinese spy balloon over the United States, and ahead of a possible meeting between President Joe Biden and Xi at the Asia-Pacific Economic Cooperation meeting in San Francisco in November.

Trade tariffs

National Foreign Trade Council President Jake Colvin said the trip could help define a "new normal" and establish a floor under the bilateral relationship. But it won't end $360 billion in tariffs imposed under former President Donald Trump, or export controls that have gathered steam under Biden.

Despite the cooling relations, trade between the U.S. and China grew in 2022 for the third year in a row, U.S. Commerce Department data show.

Yellen will emphasize the need to work with Beijing on climate change, pandemic preparedness and debt distress, even as Washington continues to take targeted actions over human rights or security concerns, a senior Treasury official said.

She will tell her Chinese counterparts that Washington is not seeking to decouple the two economies, which together account for 40% of global economic output, while reserving the right to protect human rights and U.S. national security interests through targeted actions, the official added.

Recall that China has strengthened its ties with Russia after Moscow's invasion of Ukraine. Beijing claims to support the Kremlin, and Chinese dictator Xi Jinping visited Vladimir Putin, who has been arrested by the International Criminal Court, in the spring.