Some US-China Tech Decoupling Likely, Yellen Says

Although the U.S. will likely have to separate from China in certain technology sectors, Treasury Secretary Janet Yellen said she is concerned trade tensions could lead to a broader economic decoupling that could stymie technology innovation and damage the competitiveness of U.S. companies. “Our conflict with China could result in growing decoupling of technologies,” Yellen told the Senate Finance Committee June 16. “But I worry that if we are too broad in our policies in terms of how we approach this, we can lose the benefits that come from having globally integrated technology systems where advances in one country benefit countries worldwide.”

Yellen stressed that the Biden administration views China as “our most serious competitor” and is looking at the “full range of tools” to address Chinese practices that harm U.S. national and economic security. She specifically pointed to the Committee on Foreign Investment in the U.S., which “denies” China’s ability to pursue harmful investments.

But she also said the U.S. should be careful not to completely cut off trade ties with China, including through export restrictions or efforts to prevent Chinese government access to sensitive U.S. data. “The globe has benefited substantially from spillovers of technological developments in one place to other places,” Yellen said. “I would worry about a decoupled global system, and many of our allies would be very reluctant, I think, to all but stop doing business in China.”

She said the issue is “difficult” and doesn’t have one clear solution. “In some technology areas,” she said, “I expect that we will have decoupling because we have to protect our national security.”