Treasury Secretary Janet Yellen. You join us now from India, where you're
meeting your counterparts. It's the G20 finance ministers and
central bank governors meeting. And really the cloud around this meeting
is the fresh data we got out of China today.
Beijing slowing momentum in their growth.
Citi is talking about the growth target being at risk.
I'd like to start Treasury secretary with the fact of whether you think this
means there could be an increased chance of a U.S.
recession. Well, you're talking about the slow
growth number from China. Is that right, in Murray?
Yes, correct. So I think China has seen slower growth
than they expected upon opening up from Covid.
Consumer spending has been relatively weak.
It looks like consumers are more focused on building back their savings buffers.
And so growth has been slow when, as you know, youth unemployment is quite high
there. So I think the Chinese are concerned
about sluggish growth in their economy. But what does this mean for us?
Growth and global growth overall is the soft landing in the United States still
your base case scenario? Well, many countries do depend on strong
Chinese growth to promote growth in their own economies, particularly
countries in Asia. And slow growth in China can have some
negative spillovers to the United States.
Growth is slowed, but our labour market continues to be quite strong.
I don't expect a recession. I think that we're on a good path to
bringing inflation down. The most recent inflation data were
quite encouraging that we're making progress on getting inflation down, but
as I'd hoped and expected, that would occur in the context of a strong labour
market. And we continue to see that the labour
market's been the fact the labour market's been so strong, has encouraged
more prime age people to enter the labour force and to work and that's
helped take a bit of the heat out of the labour market.
The fact that growth overall has slowed after we enjoyed a rapid recovery,
that's normal, but it's also led to some reduction in the
desire of firms to hire. Still lots of job openings, but wage
growth is moderating and inflation is subsiding.
So I think we're in a good pass on the United States.
Okay. So it sounds like soft landing is your
base case and you don't think we're going to see a recession.
Yesterday, when you were speaking to reporters, you talked about this
de-escalation with China and you ruled out lifting tariffs as part of this
de-escalation with Beijing. So what is on the table?
So, you know, several years have gone by in which we've had COVID lockdowns,
especially in China, and very limited contact between senior officials in the
United States and China. And we now have a new economic team in
China that we need to establish relationships with.
We need to get our relationship back in a more stable place, put a floor under
it, and try to promote better understanding between our countries.
So I recently made a trip. I met with a number of senior Chinese
officials, including the new economic team there.
We had very candid discussions. Each side raised a series of concerns.
Chinese certainly mentioned their concern with the tariffs that we have in
place. But we had constructive conversations
deepened our understanding and of the economic situation and of our concerns
were able to address them and agree that there are a broad range of global
challenges, particularly debt and climate change that affects the entire
global economy that we need to work on jointly.
And I'm hopeful we'll be able to do that more successfully.
On tariffs, you know, we put tariffs in place on China because we had underlying
concerns about unfair trade practices, particularly those affecting
intellectual property and technology transfer.
And those concerns really have not been addressed.
We're undergoing a four year required review with tariffs.
And, of course, China also retaliated, putting tariffs in place on us.
We have to see what comes out of the four year review.
But I would emphasize that really the underlying concerns we have have not yet
been addressed and we need to work on that going forward.
But when you're looking at de-escalating, we're trying to figure
out what would be left on the table, because what it feels right now is the
administration is actually just amping up when it comes to potential tit for
tat with Beijing. There is the outbound executive order
that potentially we could see as soon as the end of July or this summer.
Could that be a place pulling a punch from the outbound executive order?
Maybe making that a little bit more toned down?
Could that be a place you could de-escalate with Beijing?
Well, first of all, I want to say that what we're doing is not tit for tat.
What we're doing is putting in place controls.
They're designed to protect us national security and in some cases to address of
fundamental human rights abuses. And we do intend to protect our national
security. We have export controls that play an
important role in accomplishing that. And what I try to explain to our Chinese
counterparts is that our desire is to make these U.S.
policies clearly national security focused, transparent and narrow, that
we're not attempting to stifle economic progress in China, that we have and want
to continue to have deep economic ties. After all, this year, our trade has
reached almost $700 billion. We believe the national security
concerns economic. Madam Secretary, of the national
security concerns are so important. Jake Sullivan called for this outbound
in executive order two years ago. Why is it taking the administration so
long? So we are looking carefully at outbound
investment controls and they would serve as a complement to the export controls
that we have in place to make sure that we have covered all the channels by
which technologies can be transferred to China that we think pose national
security concerns. I explained to my Chinese counterparts
that if we go forward with these, they would indeed be narrowly targeted.
They would focus on a few sectors, in particular semiconductors, quantum
computing and artificial intelligence that they would contain a combination of
notification requirements and in very narrowly scoped portions of these
sectors prohibitions. But these would not be broad controls
that would affect US investment broadly in China or, in my opinion, have a
fundamental impact on affecting the investment climate for China.
So these with national security focused. It sounds like it's already done.
Is the administration have it finished and is just waiting for a good time to
release it? We want to make sure if we do this, that
we get it right. And we've been working on the details.
If we do go ahead and there is a good chance that we will that we would put
out, along with the executive order and notice of proposed rulemaking so that
the public would have a chance to comment on these proposed controls and
we would receive a wide range of public input before finalizing anything that we
do. Madam Secretary, you obviously have a
lot on your plate when it comes to re-engaging with China and your
discussions there. Just off this trip from Beijing, I'm
curious how difficult the dialogue is going to continue to be after the
revelations about the Chinese hacking of your colleague,
Secretary Gina Raimondo. So I do have concerns about hacking of
US government officials or private individuals or companies.
And I know the United States has expressed those concerns, but we intend
to continue to deepen our discussions with China, to increase our engagement.
It's especially important to explain what our motivation is to avoid
misunderstandings that can lead to this unnecessary and dangerous escalation.
President Xi and President Biden agreed in Bali that senior senior officials,
including those in economics, should interact more regularly.
And I think an outcome of my trip there was that we will have deeper ongoing
engagement at all levels. When did you learn about the China email
hacking? I'm curious if you had a chance to maybe
bring this up on your trip to Beijing. I believe I did not know about that in
Beijing. I wasn't one of the things that we
discussed. I also want to ask about what's
happening on the ground, something that I know is very important to you.
And this comes to debt relief of these developing countries.
There has been this push from the U.S. administration to use the Zambia
principle for other countries like Ghana, but that's not getting the broad
support it needs in India on the ground amongst other G20 finance ministers.
Is China the holdup here? Well, we we designed the G20, designed
something called the Common Framework, which is a set of principles and
processes to deal with unsustainable debt situations.
And we would like to see countries that apply to use the common framework, get
rapid relief from their debt that they need in order to grow and be
able to attract investment and undertake IMF programs that can help to stabilise
their economies. And the few cases that have applied to
use the common framework, including Zambia, have taken far too long.
The process has been onerous and it's taken a very long time to get debt
relief. We are pleased that China has become.
China, after all, is a major creditor of these countries.
We have been anxious to see China move more quickly and take a more
constructive attitude of participating in these debt relief talks.
And getting agreement on Zambia was an
important step. China has also been helpful in Ghana,
the case of Ghana and Sri Lanka. And I'm hopeful that we'll be able going
forward, to make more rapid progress. I should emphasize that the debt issue
is one that concerns the entire G20, and we are united in wanting to see this
framework work more effectively. And it is a priority for India as well.