'Eager' to work with China on debt, other global challenges, states US Treasury Secretary Janet Yellen

On Sunday, US Treasury Secretary Janet Yellen stated that the US was “eager” to collaborate with China on areas of common interest, such as debt restructuring for poorer nations, and that multilateral development banks needed reforms before capital increases could be considered.

Yellen said at a press conference ahead of a meeting of Group of 20 finance ministers and central bankers in India that her visit to Beijing last week helped put the US-China relationship on “surer footing” and that the world’s two largest economies owed the rest of the world an obligation to “cooperate on areas of mutual concern.”

“There is much more work to do. But I believe this trip was an important start,” Yellen said. “I am eager to build on the groundwork that we laid in Beijing to mobilise further action.”

Concerns remain about China’s unfair trade practices, which prompted Washington to impose tariffs on Beijing. “They really have not been addressed,” she said.

Yellen stated that US firms desire an environment in which they can “invest and thrive in China.”

Yellen stated that Washington will continue to deny Russia access to military weapons and technologies that it requires for its invasion of Ukraine.

“One of our core goals this year is to combat Russia’s efforts to evade our sanctions. Our coalition is building on the actions we’ve taken in recent months to crack down on these efforts,” she added.

India, which chairs the G20 this year, has taken a largely neutral stance on the war, declining to blame Russia for the invasion launched by Moscow in February last year, urging a diplomatic solution, and significantly increasing its purchases of Russian oil even as Western nations seek to squeeze Moscow.

Yellen said she would continue to push hard at the G20 meeting, in Gandhinagar in the northwestern Indian state of Gujarat, for “full and timely participation of all bilateral official creditors on pending debt restructurings”.

She said she discussed Zambia’s restructuring with her Chinese counterparts and, although it took too long to negotiate, differences were overcome.

“We should apply the common principles we agreed to in Zambia’s case in other cases – rather than starting at zero every time. And we must go faster,” Yellen said, adding she hoped debt treatments for Sri Lanka and Ghana could be finalised quickly so the International Monetary Fund (IMF) could move forward with initial loan programme reviews this fall.

She said a debt restructuring “user guide” was needed for borrowing countries and other stakeholders to provide clarity about the process.

Yellen said the IMF’s Poverty Reduction and Growth Trust, which provides zero-interest loans to the world’s poorest countries, needed to be put on sounder financial footing. The US Treasury is ready to assist the IMF to consider options for this, including using internal fund resources, she said.

‘Better banks’

Yellen also outlined a number of next steps for the World Bank and other multilateral development banks’ evolution but stated that any consideration of capital increases for the institutions must come after reforms aimed at expanding their role beyond poverty reduction to address global challenges such as climate change and pandemics.

“We should build better banks, not just bigger banks,” stated Yellen.

She reiterated her estimate that multilateral development banks might jointly increase lending by $200 billion over a decade by implementing or considering balance-sheet changes. She suggested that they may enhance this even more by following suggestions from last year’s G20 Capital Adequacy Framework study.

Among other World Bank reform steps, Yellen said she was pushing for a new set of principles that would allow the “targeted use” of the bank’s concessional financing for global challenges, including climate change and measures to boost such resources.

She said she would like the World Bank to explore options for lending to sub-sovereign and supra-sovereign borrowers like the COVAX vaccine initiative.

Yellen said the United States was committed to implementing a global corporate minimum tax deal reached in 2021 despite the lack of action by the US Congress to do so. She said negotiations on technical details of the deal’s Pillar 1 – reallocation of taxing rights on large multinationals including big technology firms – were “very close” to completion.