My Take | Yellen talks sense on decoupling peril, but few take it at face value

She means it, she doesn’t mean it. All day yesterday, my inbox was flooded with emails from friends, colleagues and the occasional friendly reader speculating whether Janet Yellen meant what she said.

In a speech at Johns Hopkins University, the US Treasury secretary said decoupling from China would be “disastrous” and Washington asked for a “constructive and fair” economic relationship between the two countries rather than stifling China’s rise. An old correspondent claims her speech “is a huge game changer”. I doubt that, but he has a doctorate from Cambridge or Oxford as well as several books on China so I wouldn’t want to challenge his IQ.

We should, of course, be glad that America’s chief official in charge of money matters – Yellen was previously chair of the US Federal Reserve – is talking sense. It’s certainly a step up from those Neanderthals who sit on the US Congress’ Select Committee on the Chinese Communist Party, which has just concluded a war game and called for more rapid military build-ups. How predictable! Washington has already budgeted more than a trillion dollars for its military this year. No wonder so many American citizens are broke and live on the streets.

A few conciliatory remarks will not reverse all the hostilities the US has projected against China and will no doubt continue, even escalate. The antagonism of US foreign policy towards China is bipartisan and well-established. It is like a giant oil tanker that cannot change course easily.

Yellen isn’t the only one making a point against decoupling. Former Treasury chiefs Henry Paulson and Lawrence Summers have both spoken out. Writing in Foreign Affairs in January, Paulson observed that “America’s China policy is not working [and] is likely to hurt Americans more than Chinese people over the long term”.

“China and the United States are in a headlong descent from a competitive but sometimes cooperative relationship to one that is confrontational in nearly every respect,” he added. “As a result, the United States faces the prospect of putting its companies at a disadvantage relative to its allies, limiting its ability to commercialise innovations. It could lose market share in third countries. For those who fear the United States is losing the competitive race with China, US actions threaten to ensure that fear is realised.”

More recently, Summers warned the hawkish consensus in Washington against China is an “epistemic closure” that disallows different voices from being heard, and that’s dangerous.