U.S. Treasury Secretary Janet Yellen has warned Chinese banks and exporters against aiding Russia’s military capacity, citing potential sanctions.
What Happened: Yellen ended her four-day visit to China with a clear message: companies worldwide, including those in China, should avoid supporting Russia’s war. Non-compliance could lead to significant consequences, reported Bloomberg.
"I stressed that companies, including those in the PRC, must not provide material support for Russia's war, and that they will face significant consequences if they do," Yellen said.
She added, "Any banks that facilitate significant transactions that channel military or dual-use goods to Russia's defense industrial base expose themselves to the risk of U.S. sanctions."
Yellen’s warning coincided with Russian Foreign Minister Sergei Lavrov‘s visit to Beijing for discussions, including the Ukraine issue. Despite China’s neutral position on the war, trade between China and Russia has increased since the conflict’s inception.
The Biden administration is stepping up measures to penalize global firms that assist Russia in circumventing sanctions imposed by the U.S. and its allies following Russia’s invasion of Ukraine in 2022. Yellen’s explicit threat of sanctions, delivered in Beijing, is unusual.
During her visit, Yellen also addressed concerns over China’s excessive investment in manufacturing, particularly in new green-energy technologies. She warned that unchecked Chinese overcapacity could destabilize other economies.
Despite the stern warning, the Chinese hosts maintained a cordial demeanor throughout the discussions, which both parties described as open and constructive. "That's why even though Yellen is making harsh comments, they are not freezing her out," he said.
Christopher Beddor, Deputy China Research Director at Gavekal Dragonomics, notes that the U.S. currently holds some leverage in negotiations as China’s economy shows signs of fragility. This prompts its leadership to acknowledge widespread agreement with Yellen’s stance.
Why It Matters: Yellen’s warning to China comes amid increasing global concern over Russia’s actions in Ukraine. The U.S. has previously warned of “significant consequences” if Chinese firms aid Moscow’s war efforts.
Yellen’s concerns about China’s overcapacity in green technologies, particularly electric vehicles (EVs) and solar panels, echo earlier warnings from her and President Biden. They fear that China could flood global markets with these products.
However, China’s Minister of Commerce, Wang Wentao, has refuted these claims, attributing the success of China’s EV industry to “constant innovations” rather than subsidies.
Yellen’s second visit to China in recent times comes amid ongoing economic tensions between the two countries. The discussions and warnings during this visit underscore the complex dynamics of U.S.-China relations and their global implications.
Treasury Secretary Janet Yellen addresses the Detroit Economic Club on Feb. 14, 2024. Photo by Dustin Blitchok.
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