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China Faces Yuan on Yuan as U.S. Decries Weak Currency

U.S. Treasury Chief China Coordinator Sharon Yuan
Sharon Yuan, senior coordinator for the U.S.-China Strategic and Economic Dialogue and deputy assistant secretary for trade and investment policy at the U.S. Treasury, typically communicates with Chinese officials two or three times a week. Photographer: Andrew Harrer/Bloomberg

July 7 (Bloomberg) -- Among the half-dozen U.S. Treasury officials traveling to Beijing for talks with their Chinese counterparts this week, Sharon Yuan will, as usual, carry the heaviest suitcase.

Yuan’s stuffed gray Travelpro befits the scope of her two jobs. As head of the department’s trade and investment policy and its chief China coordinator, she often arrives before her colleagues and makes multi-city stops. After the July 9-10 U.S.- China Strategic and Economic Dialogue, she’s off to Brussels for trade talks.

The immediate task before the Taiwan-born Yuan is persuading a slow-moving Chinese government to allow greater market access for U.S. businesses. She’s Treasury Secretary Jacob J. Lew’s everyday liaison with the world’s second-largest economy as they press China to quicken its economic opening and increase the value of a currency that happens to be called the yuan.

“How China implements its reforms will matter greatly to the United States and our ability to compete on a level playing field,” Yuan, 37, said in an interview. A good outcome in Beijing this week would be “to make as much incremental progress as we can” and put “some flesh on the bones” of China’s pledge to move toward a more market-oriented economy, she said.

Her importance is elevated because the department has vacancies in the top two international affairs positions. Nathan Sheets, nominated by President Barack Obama to be undersecretary, and Ramin Toloui, selected as an assistant secretary, have yet to be confirmed by the Senate. Sheets has been working as a counselor to Lew since February and will be taking part in the Beijing talks.

Closed Markets

“The most important issue for the U.S. is that China still has a lot of markets that are closed to exports, and probably more important, to foreign investment -- in sectors like financial services, media and telecom,” said David Dollar, a senior fellow at the Brookings Institution in Washington who was based in Beijing for the Treasury from 2009 to 2013.

Yuan brings a lawyer’s precision to the talks, as well as some understanding of Mandarin, which she learned growing up from her Chinese father and Taiwan-born mother. She spent her first 18 months in Taiwan before moving to Southern California.

Yuan went to the Treasury in 2009 as deputy assistant secretary for trade and investment policy after six years at Sidley Austin LLP, where she was a trade attorney and worked on investment disputes.

Trade Talks

In addition to her China duties, Yuan is a key figure in negotiating the parts of trade pacts that involve banking and securities. The U.S. is trying to finish the 12-nation Trans-Pacific Partnership agreement and is in talks with Europe on the Transatlantic Trade and Investment Partnership -- the subject of her trip to Brussels for talks July 14.

Yuan is “very exact” and “wants to get the language just right,” said David Loevinger, her predecessor as senior coordinator for China affairs and the annual Strategic and Economic Dialogue. “She also knows the political direction her bosses want to go.”

This time she will have to overcome China’s anger over Justice Department charges in May that members of the Chinese military stole trade secrets from companies including United States Steel Corp. by hacking into corporate computers.

At a press briefing in Beijing today, Assistant Minister of Foreign Affairs Zheng Zeguang urged the U.S. to stop “spying” on the Chinese government, companies and individuals. The U.S. has made mistaken comments on sea disputes and cybersecurity and should respect China’s sovereignty, he said

Yellen’s Visit

The two nations will have “frank” talks on the yuan’s exchange rate and the effect that U.S. monetary tightening will have on the world economy and they can make progress on bilateral investment, said Zhu Guangyao, vice minister of finance. Federal Reserve Chair Janet Yellen will attend, Zhu said.

The two countries will hold security talks tomorrow, Zheng said. Vice Foreign Minister Zhang Yesui and Wang Guangzhong, deputy chief of general staff of the People’s Liberation Army, will attend, he added.

“There’s always something going on in the relationship,” Treasury’s Yuan said. “We have worked to establish a relationship that allows us to address even the most complicated and sensitive issues.”

‘Currency Manipulator’

Both China’s interventions to hold down the value of the yuan and the Treasury’s response have drawn criticism from some lawmakers and businesses that say the U.S. has been too soft. The Obama administration’s approach has been “completely inadequate,” the Alliance for American Manufacturing said after a twice-annual Treasury report declined to name China a currency manipulator.

Yuan is a protégé of Lael Brainard, the former Treasury undersecretary who is now a Federal Reserve Board governor. They met in late 1997, when Brainard was in President Bill Clinton’s National Economic Council, due to a series of events that Yuan describes as “a lot of lucky coincidences.”

Yuan was on winter break from her senior year at the University of California at Berkeley and staying with her parents, who had moved to the Washington area. She phoned the White House to ask if there were any internships or short-term work available.

Cold Calling

To her surprise, she reached “a live person on the other end” who told her to come in the next day for an interview. While filling out the paperwork, she met an intern from Berkeley who introduced her to Brainard.

Yuan watched from the sidelines as Brainard and other U.S. officials responded to the Asian financial crisis. After Yuan graduated from Berkeley, where she was student president her senior year, Brainard called asking her to return to the NEC the day before Yuan was going to accept another job.

She worked for two years under Brainard, then the NEC’s deputy for international affairs, taking part in meetings including a Group of Eight summit in Japan in 2000, before leaving to attend the University of Virginia’s law school.

“Because she was at an interagency coordinating position at such an early age at the White House, she understands very acutely the whole set of equities we have with China,” Brainard said in an interview. The Strategic and Economic Dialogue, or S&ED, includes officials from agencies such as the State, Commerce and Energy departments.

Common Language

Yuan’s ethnicity adds another dimension to her talks with Chinese officials.

While Yuan conducts meetings in English, Mandarin was her first language at home and her understanding of it is useful. “There are some things as far as tone, demeanor, and sometimes things don’t really translate well,” she said.

Officials in China might initially expect someone of Chinese ethnicity to be more sympathetic to them, though Yuan is a “fierce defender of U.S. national interests,” said Loevinger, who spent three years in China as a Treasury attaché before returning to Washington to be China coordinator. He’s now a managing director at Los Angeles investment manager TCW Group Inc.

In Beijing this week, Yuan’s role will require some tough talk as she presses Chinese officials to move more quickly on a bilateral investment treaty the two countries agreed to at last year’s meeting in Washington.

Lew’s Frustration

Lew, speaking before his fourth trip to Beijing in less than 17 months as secretary, said July 1 he was frustrated with China’s attempt to exclude “almost everything of any value” from part of the agreement.

Brainard, who was at the Treasury when the agreement was reached, said the treaty is in part the result of Yuan’s persistence and ability to build relationships with Chinese officials.

Bilateral ties have been further strained by territorial disputes in the region. The Chinese government is increasingly concerned about what it views as the Obama administration’s support for the Philippines, Japan and Vietnam in their maritime disputes with Beijing.

Secretary of State John Kerry will also attend the meetings in Beijing.

The two countries will discuss “priority issues” of overlapping interest such as a nuclear weapons-free North Korea, negotiations on Iran’s nuclear arms program and working together to combat climate change, Daniel Russel, assistant secretary of state of East Asian and Pacific Affairs, said in June 25 testimony before a Senate committee.

Regular Contact

Yuan typically communicates with Chinese officials two or three times a week, and several Treasury officials working on S&ED issues often do so daily. Because of the 12-hour time difference with Beijing, the calls are early in the morning or late in the evening Washington time.

The most challenging part of the relationship is “the intensity of it and the need to always be engaging,” Yuan said.

The pressure on the Obama administration for change comes partly from Congress, just as it did during President George W. Bush’s two terms. The Treasury hasn’t named China a currency manipulator in the foreign-exchange report since 1994.

U.S. lawmakers including Senator Charles Schumer, a New York Democrat, and Jeff Sessions, an Alabama Republican, have said the administration should label China a manipulator. By keeping the value of the currency artificially low, China puts U.S. businesses at a disadvantage in the global marketplace, they say.

China’s opening-up to foreign investment has become “quite broad after 30 years of progress and the speed has been increasing,” said Meng Meng, a researcher at the government-run Chinese Academy of Social Sciences in Beijing. “China is already quite open to the U.S., and the speed of further opening up is not low, but the expectation from U.S. is for something relatively high.”

By U.S. standards, Chinese leaders are slow to make changes, so success is measured by small steps in the right direction, according to Yuan. The goal is to get China to “play by the global rules,” she said. “China’s economy is too large and too important for it to bypass the global norms.”

To contact the reporter on this story: Ian Katz in Washington at

To contact the editors responsible for this story: Chris Wellisz at Brendan Murray, Mark Rohner

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