US, China form economy working groups in sign of better ties

The US and China are establishing two working groups to discuss economic and financial issues, the latest sign of a thaw in relations between the world's largest economies.

The groups "will provide ongoing structured channels for frank and substantive discussions on economic and financial policy matters, as well as an exchange of information on macroeconomic and financial developments," the US Treasury Department said in a statement Friday.

Meetings will be held regularly at the vice-minister level, with officials reporting back to Treasury Secretary Janet Yellen and Chinese Vice Premier He Lifeng, according to the Treasury. That framework is notably less extensive than the bilateral forums earlier this century, when gatherings featured multiple cabinet members and spanned a wide array of subject matters. On the same day, a top Biden official told reporters in New York that the US won't be able to cut China out of the critical minerals supply chain even as Washington seeks to diversify its sources of the ingredients that go into everything from electric vehicle batteries to solar panels. 

"We're not going to solve the climate crisis without the involvement of the PRC," Jose Fernandez, the US undersecretary for economic growth and the environment, said, referring to the country's formal name, the People's Republic of China.

"China is the second-largest economy in the world, a major trading partner of the US," he said. "We will continue working with them while pursuing our interests and protecting our companies and criticising them when we feel they should be criticised."

The announcement of the two working groups comes after a string of visits to China by high-level US officials that appear to have helped stabilise ties. Tensions between Washington and Beijing had escalated over several issues, including US export controls, then-House Speaker Nancy Pelosi's visit last year to Taiwan, and an alleged Chinese spy balloon discovered floating over the US.

The creation of the two groups also marks a resumption of regular economic dialogue between the two nations for the first time since 2018, when the Trump administration abandoned structured engagement. US Commerce Secretary Gina Raimondo also established a new commercial issues working group on her August visit to China, as well as a regular meeting to talk about export controls.

Washington and Beijing agreed to establish the groups during Yellen's visit to China in July, a senior Treasury official said, adding that the groups will help each side explain their actions and allow the US to raise problems and push for solutions. They'll also discuss issues ranging from debt restructuring for developing nations to topics covering regulations and stability, the official said.

China's Ministry of Finance and central bank said in a statement on the forums that there would be "regular and ad-hoc" meetings, while the Treasury said meetings would be "on a regular cadence."

Chinese state-run CCTV said in a commentary on social media that there's a common expectation in the international community for the US and China, as the world's top two economies, to strengthen communication and coordination in the economic and financial fields, and to stabilise global market confidence.

China's agenda

The working groups will also serve as a platform for China to continue pushing back on issues including the "unilateral suppression and sanctions" that the US has imposed on China, the CCTV commentary said, adding that it may not be easy for the two sides to keep them going with so many disagreements.

Yellen, in a statement posted on X, said that "it is vital that we talk, particularly when we disagree."

"These working groups will serve as important forums to communicate America's interests and concerns, promote a healthy economic competition between our two countries with a level playing field for American workers and businesses, and advance cooperation on global challenges," Yellen said.

In another sign the two sides are attempting to ease tensions, US National Security Adviser Jake Sullivan and Chinese Foreign Minister Wang Yi recently discussed a possible conversation between Xi Jinping and Joe Biden.

Those talks were aimed at making sure the two presidents were positioned to meet at the Asia-Pacific Economic Cooperation summit in San Francisco in November, according to people familiar with China's preparations.

"Given various high level meetings in recent weeks and the positive readouts emerging from them, I do think the chances of Xi attending APEC have increased," said Gabriel Wildau, managing director at advisory firm Teneo Holdings LLC in New York. "On the other hand, we shouldn't overestimate the significance of formal working groups. There's still little sign of political will on either side to offer substantive policy concessions."