Yellen: Coordinated approach on China investment rules needed to avert evasion

She later told a news conference that U.S. and European Union work on outbound investments was a "shared priority" and said Washington was eager to support EU efforts to implement measures similar to the "targeted program" being put in place in the United States. Asked if she worried that differences among members of the 27-nation bloc would prevent timely passage of EU restrictions, Yellen said Washington had received assurances that Group of Seven (G7) partners would "take a look at the possibility of putting outbound investment restrictions ...

Treasury Secretary Janet Yellen said on Monday U.S. restrictions on outbound investment in China would be important and effective, but it was critical over the longer term to ensure a coordinated approach with allies to avert any evasion.

Yellen told euro zone finance ministers on Monday that collaboration between the United States and Europe was crucial with regard to their respective economic ties with China, citing outbound investment restrictions as an example of targeted actions needed to safeguard national security interests. She later told a news conference that U.S. and European Union work on outbound investments was a "shared priority" and said Washington was eager to support EU efforts to implement measures similar to the "targeted program" being put in place in the United States.

Asked if she worried that differences among members of the 27-nation bloc would prevent timely passage of EU restrictions, Yellen said Washington had received assurances that Group of Seven (G7) partners would "take a look at the possibility of putting outbound investment restrictions ... in place." "I think our own restrictions ... when they go into effect will be important and effective. But over a long period of time, we would like to make sure that we have a coordinated approach to close down potential channels for evasion," she said.

Eurogroup President Paschal Donohoe told reporters that the EU had flagged the need to ensure that China and the EU were "engaging with each other in a fair way" with regard to many different digital and green sectors. "We want to look ... at the different avenues by which we can de-risk a really important trading relationship between China and the European Union," he said, expressing confidence that Brussels could deliver on that pledge.

"We are confident that we can deliver that and work with them to minimize any effects that it may have on global trade, on our engagement and trade with China," he added. Yellen said the U.S. and EU made a constructive joint statement on the issue last spring, and Washington looked forward to supporting the European Commission’s next steps.

"We face shared risks from common vulnerabilities and dependencies, and our work to each build resilience can support one another as well," she said. EU wariness towards China has grown due to Beijing's closer ties with Moscow. At the same time, the EU's trade deficit with China has widened to 400 billion euros ($420 billion), double the level of five years ago.

The EU executive should complete an assessment of risks by the end of the year that could lay the groundwork for outbound investment restrictions, but its members are divided about how and in what scope to restrict investments in China.