Yellen warns China about consequences of supporting Russia

(Bloomberg) US Treasury Secretary Janet Yellen on Wednesday issued a warning to China about its alignment with Russia, suggesting possible economic consequences for the international community depending on its approach to Russian President Vladimir Putin's invasion of Ukraine.

“China has recently affirmed a special relationship with Russia,” Yellen said in statements prepared Wednesday to the Atlantic Council, an institution created in the 1960s to foster support for collective international security. “I fervently hope that China will do something positive about this relationship and help end this war.”

In some of her most incisive comments on China since taking office, the Chief of the Treasury warned that “in the future, it will become increasingly difficult to separate economic issues from broader considerations of national interest, including national security.”

“The world's attitude towards China and its willingness to adopt greater economic integration may well be affected by China's reaction to our call for decisive action on Russia,” he said.

President Xi Jinping's government has refrained from joining the US-directed sanctions against Russia, while calling for respect for the principles of sovereignty and territorial integrity. China has also stated that Russia's movements in Ukraine “are not at all comparable” with Beijing's determination to reunify Taiwan with mainland China.

Territorial integrity

“China cannot expect the global community to respect its appeals to the principles of sovereignty and territorial integrity in the future if it doesn't respect these principles now when it counts,” Yellen said.

He also reiterated to nations that have stayed out of the international effort to punish Russia, any initiative to undermine sanctions would provoke the wrath of the US and its allies.

The speech comes a week before finance chiefs from around the world meet, virtually and personally, in Washington for spring meetings organized by the World Bank and the International Monetary Fund.

Faced with Xi's actions to present China's authoritarian system as a model for emerging and developing nations around the world, Yellen said that “the future of the international order” was at stake.

Principled Action

“We act in support of our principles: our opposition to aggression, to widespread violence against civilians, and in line with our commitment to a rules-based world order that protects peace and prosperity,” he said.

Yellen also used the speech to call on governments to expand the cooperation shown by sanctioning Russia to other urgent global projects, from combating climate change to increasing efforts in vaccine distribution.

Modernization of institutions

He urged the IMF and multilateral development banks to modernize “to make them fit for the 21st century.”

Nations should also consider IMF governance “to ensure that it reflects both the current global economy and members' commitments to the underlying principles and objectives of the IMF,” Yellen said.

The Treasury Secretary called for increased support for developing countries from development banks, bilateral official donors and creditors and the private sector, including for the necessary infrastructure and climate objectives.

“The answer to date is not up to the scale needed,” he said. “Experts put funding needs at billions, and so far we've been working around billions.”

Original Note:

Yellen Warns China on Russia Tie, Hints at Economic Consequences

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