Chinese Restrictions on Chip Minerals Highlights Importance of Diversifying, Yellen Says

Treasury Secretary Janet Yellen said she is “concerned” about China’s new export controls on critical minerals used to produce semiconductors (see 2307060053), saying the U.S. is still assessing the impact but that they “remind us of the importance of building resilient and diversified supply chains.” Speaking during a July 7 roundtable with American businesses in China, Yellen said the administration is working to make sure U.S. companies are competing with China on a “level playing field.”

“Our economic relationship with China must work for American workers and businesses,” Yellen said. This includes coordinating with our allies to respond to China’s unfair economic practices.

Yellen, who was holding meetings with Chinese officials in Beijing, said she spoke with them about “the concerns that I’ve heard from the U.S. business community -- including China’s use of non-market tools like expanded subsidies for its state-owned enterprises and domestic firms, as well as barriers to market access for foreign firms.” She also said she was “particularly troubled by punitive actions that have been taken against U.S. firms in recent months.” China in May imposed sales restrictions on U.S. chip company Micron (see 2305220053), prompting some Chinese firms to begin removing Micron products from their supply chains (see 2306230011).

The U.S. “seeks healthy economic competition with China,” Yellen said. “But healthy economic competition -- where both sides benefit -- is only sustainable if that competition is fair.”

She stressed that the U.S. doesn’t “seek a wholesale separation of our economies” and that it wants to “diversify, not to decouple.” Decoupling from China "would be destabilizing for the global economy, and it would be virtually impossible to undertake,” Yellen said.

She also said she told Chinese officials “that actions we take to protect our national security are designed to be narrowly targeted,” and that they are based on “straightforward national security considerations and not undertaken to gain economic advantage over China.”