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[Text/Observer Network Wang Kaiwen] According to multiple media reports, the China-US Financial Working Group held a meeting in Shanghai from August 15 to 16. This was the fifth bilateral meeting of the working group since its establishment in September last year.

Many foreign media have noted that this meeting was held at a time when trade tensions between China and the United States are intensifying. The New York Times said that against this background, a group of senior officials from the Biden administration went to Shanghai to attend the meeting in order to "maintain the stability of economic relations between the two sides."

Lu Xiang, an expert on American issues at the Chinese Academy of Social Sciences, told Observer.com on August 17 that various U.S. policies are currently facing great uncertainty. The Biden administration does not have much time left, and it is difficult to expect it to introduce major policies. However, if pragmatic discussions on relevant issues in some specific areas can be conducted, it will help maintain stability in Sino-U.S. relations.

What did China and the United States talk about?

The China-US Financial Working Group is a financial exchange mechanism between the two countries established under the guidance of the heads of economic and trade relations between China and the United States to implement the important consensus reached by the two heads of state during their meeting in Bali.

In September 2023, China and the United States established economic working groups, including the "Economic Working Group" and the "Financial Working Group". The "Economic Working Group" is led by deputy ministerial officials from the finance ministries of China and the United States, and the "Financial Working Group" is led by deputy ministerial officials from the People's Bank of China and the U.S. Treasury Department. The two working groups will hold regular and irregular meetings to strengthen communication and exchanges on issues related to the economy and finance.

In previous meetings of the China-US Financial Working Group, China and the United States have conducted professional, pragmatic, candid and constructive communication on issues such as the two countries' monetary policy and financial stability, financial regulatory cooperation, financial market institutional arrangements, anti-money laundering and counter-terrorist financing, global financial governance, cross-border payments and data.

This week's meeting in Shanghai was the fifth since the China-U.S. Financial Working Group was established in September last year and the second meeting held in China.

According to US media reports, the US delegation was led by Brent Neiman, Assistant Secretary of the Treasury, and set off on August 12, local time. The delegation also included Nellie Liang, Deputy Secretary of the Treasury and a financial stability expert who once worked at the Federal Reserve, as well as officials from the Federal Reserve and the US Securities and Exchange Commission.

“At this Financial Working Group meeting, we plan to discuss financial stability, cross-border data, lending and payments-related issues, private sector efforts to advance financing for the low-carbon transition, and concrete steps we can take to improve communication when financial stress emerges,” Naiman said before leaving.

The New York Times said that financial regulators in the United States and China have been conducting financial shock exercises this year so that the two sides can coordinate their response measures in the event of a crisis that could affect the international banking or insurance system, such as a cyber attack or a climate disaster.

In June this year, Nicholas Tabor, assistant secretary of the U.S. Treasury Department for international financial markets, said in a speech that he had participated in the past four U.S.-China financial working group meetings, "This experience shows that regular and candid engagement between U.S. and Chinese financial authorities is very valuable in promoting mutual understanding."

Tabor said the process of establishing the communication channel "has allowed participants in the two countries' financial working groups to begin to build the necessary relationships to understand each other's policies, identify areas of cooperation that can be mutually beneficial, and provide space for clear communication on areas of disagreement. We have made progress, but there is still much work to do."

"Practical discussions between China and the United States will help stabilize bilateral relations"

From the "Bali Consensus" to the "San Francisco Vision", China-US relations have shown a trend of stabilizing, the communication channels between the two sides have been re-established, and interactions in all fields and at all levels have become more frequent. In addition to the China-US Financial Working Group and the China-US Economic Working Group, since last year, the two sides have also established the China-US Trade Working Group, the China-US "2020s Enhanced Climate Action Working Group", and the China-US Anti-drug Cooperation Working Group.

But on the other hand, there has been no fundamental change in the US's containment of China.

Since the beginning of this year, the United States has repeatedly hyped up the "China overcapacity theory" and labeled China's new energy industry represented by electric vehicles, lithium batteries, and photovoltaic products as "overcapacity". In May this year, the Biden administration announced that on the basis of the original 301 tariffs on China, it would further impose tariffs on electric vehicles, lithium batteries, photovoltaic batteries, key minerals, etc. imported from China, involving about US$18 billion. Among them, the tariff on imported electric vehicles from China was increased from 25% to 100%.

Bloomberg noted that the latest China-US financial work meeting was held against the backdrop of escalating trade tensions between the two countries, and "Washington expressed concerns about China's export-oriented industrial policies."

The New York Times stated that although communication between the United States and China has improved over the past year, differences between the two sides on industrial policy and technological dominance remain. A group of senior officials from the Biden administration went to Shanghai for a meeting this week, hoping to maintain the stability of economic relations between the two countries amid growing trade tensions.

Lu Xiang believes that the Biden administration has entered "garbage time". "The United States is currently facing huge uncertainties in both political and economic policies. It is difficult to expect them to introduce major policies at this stage."

Despite this, Lu Xiang said that in some specific areas, the Biden administration still hopes to make a difference. At the end of last month, the China-US Anti-Drug Cooperation Working Group held its first senior officials' meeting. It is believed that this China-US Financial Working Group meeting will also have pragmatic discussions on relevant issues, which will help maintain the stability of Sino-US relations.

However, Lu Xiang also mentioned that after U.S. Treasury Secretary Janet Yellen visited China in April this year, the United States quickly imposed tariffs on Chinese electric vehicles and other products. "Even if some mid-level officials in the Biden administration are still willing to talk about some things, it is hard to imagine that these officials can reverse the tone set by their ministers."

In addition, in Lv Xiang's view, the US's current talk about financial stability is somewhat "self-deception". "In fact, the instability is created by themselves."

"Everyone can see clearly that the so-called 'Bidenomics' is undoubtedly a failure. This is not only a failure in economic and trade policy toward China, but the two major bills of the Biden administration (the Chips and Science Act and the Inflation Reduction Act) have not brought substantial improvements to the US manufacturing industry. Instead, they have fueled financial bubbles and financial risks, leaving the next US president with a very difficult situation," said Lu Xiang.

As the world's largest economy and the U.S. dollar being the world's main international currency, the U.S. macroeconomic policy adjustments have huge spillover effects. In the past few years, the U.S. "flooding" policy has not only caused high inflation in the country, but also disrupted the global financial order. In addition, the scale of the U.S. federal government debt has also caused widespread concern. In April this year, the International Monetary Fund (IMF) criticized the current U.S. fiscal policy as unsustainable and threatening global financial stability.

Lu Xiang pointed out that China's own inflation level remains moderate, and as the world's largest supplier of goods, China's production capacity has made a huge contribution to stabilizing global inflation. "Without China's production capacity, it is difficult to imagine the situation of global inflation."