China promised not to take advantage in trade by undermining the value of its currency as part of a Phase 1 trade deal with the United States three years ago. But if China allows its currency to weaken in any way, the Biden administration’s options may be limited.
China has provided more than $500 billion to developing countries through its loan program, making it one of the world’s largest lenders. Many of those borrowers, including several African countries, have struggled financially since the pandemic and face the prospect of defaulting on their loan payments.
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 owed to them. But for more than two years, China has insisted that other lenders and multilateral lenders absorb financial losses as part of any restructuring, hindering the debt relief process and hurting developing countries. Millions are at risk of being pushed into poverty.
In June, international lenders including China agreed a debt relief plan with Zambia that would grant it a grace period on interest payments and extend the dates its debt is due. The arrangement did not require that the World Bank or the International Monetary Fund forgive any debt, giving 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 this has had an impact on economic ties as well. The flight of a Chinese surveillance balloon across the United States this year greatly alarmed the American public, and members of Congress are pressing the administration to reveal more of what it knows about the balloon. Mr. Biden’s recent dub of Chinese leader Xi Jinping as a “dictator” also infuriated Chinese officials and state-run media.
US officials are concerned about China’s human rights violations, including its crackdown on the democracy movement in Hong Kong and detentions of mainly Muslim ethnic minorities in northwestern China’s Xinjiang region. A senior Treasury Department official said on condition of anonymity ahead of Ms Yellen’s visit that the United States had no intention of backing down from its views on human rights during the meetings in China.
Chinese officials continue to oppose various sanctions that the United States has issued against Chinese companies, organizations and individuals for national security threats and human rights violations – including Sanctions against Li ShangfuDefense Minister of China. The Chinese government has cited those sanctions as a reason for rejecting high-level military talks.