Transcript: Treasury Secretary Janet Yellen on "Face the Nation," July 9, 2023

The following is a transcript of an interview with Treasury Secretary Janet Yellen that will air on "Face the Nation" on July 9, 2023.

MARGARET BRENNAN: And joining us from Beijing is Treasury Secretary Janet Yellen. It has been a whirlwind trip for you, Madam Secretary. The Biden administration has argued that Xi Jinping, China's president, wants to replace the U.S. as the most dominant economy with the most military capable force he can build. How do you avoid a clash between our two countries?

TREASURY SECRETARY JANET YELLEN: Well, I participated in the meeting between President Xi and President Biden in Bali and on both sides, the sentiment that was expressed is that the world is big enough for both of our countries to thrive, to cooperate on shared global challenges, to have a meaningful economic relationship, and that we needed to stabilize our relationship to make sure that we were able to accomplish that. And the purpose of my trip was to meet the new economic team in place here, to establish ongoing contact, and to have frank and candid discussions, substantive discussions about both our differences so that we can address differences in concerns, and also our desire to cooperate to address shared global challenges. 

MARGARET BRENNAN: Understood, but at the top of your meeting with the Chinese vice premier, he actually acknowledged one of those awkward moments. He mentioned the Chinese spy balloon, he called it an airship. Can you say at this point that tension has been smoothed over?

TREASURY SECRETARY YELLEN:  Well, what I can tell you is that I had a very constructive visit. I received a warm welcome, and had very substantive series of meetings. I would say almost 10- around 10 hours of meetings with the premier, Premier Li, with Vice Premier He, with the PBOC, the People's Bank of China, had Pan, with Finance Minister Liu, and we had substantive conversations about the global economy, developments in our own economies, financial markets, and a list of concerns that each of us brought to the table that we agreed to follow up on over time.

MARGARET BRENNAN: Understood. The U.S. Ambassador to China, Nick Burns told me just last month that four or five different American companies had been experiencing intimidation at the hand of Chinese authorities and he pointed towards an espionage law that had recently been rolled out. Did you get assurances that American firms won't be intimidated?

TREASURY SECRETARY YELLEN: Well, that certainly is one of the concerns that I expressed. I had the chance to meet with American businesses and to hear about their concerns, but- and certainly in my meetings, that is a concern that I raised.

MARGARET BRENNAN: Was it understood?

TREASURY SECRETARY YELLEN: I can also say that American- Well, it's something that we will have further conversations about, and try to address over time. But I also heard from American firms here that they see enormous opportunities and it's important to them that we maintain healthy economic relations with China so that American businesses and American workers can- can benefit from the opportunities here and vice versa.

MARGARET BRENNAN: Understood. The administration has taken some targeted national security focused measures that do impact trade and the economy, including some restrictions on high end technology sales. The administration is reportedly also considering restrictions on computer chips related to artificial technology and cloud computing. Do you have a sense of what the retaliation will be from China when the U.S. does this?

TREASURY SECRETARY YELLEN: Well, an objective of my trip was to explain that national security is something that we can't compromise about and we will protect, and we will do so even if it harms our own narrow economic interests. But that when we take such actions, which do have an effect on the Chinese economy, that we will make sure that they are transparent, narrowly targeted, and well explained. And this is a point that I tried to make, in my conversations with Chinese counterparts. I would point out that the Chinese also protect their own national security through export controls and other similar devices, including controls on outbound investment. I explained that President Biden is examining potential controls on outbound investment in certain very narrow high technology areas, and that if we go forward with these, that they will be indeed very narrowly targeted, and not- should not be something that will have a significant impact on the investment climate between our two countries.

MARGARET BRENNAN: You're talking there, I think about the long-delayed executive order that would put some restrictions on what American companies can do when it comes to investing in China. Is that still in question?

TREASURY SECRETARY YELLEN: That's right.

MARGARET BRENNAN: Did you hear anything in your meetings that would make you tweak it, change it, pull back from it?

TREASURY SECRETARY YELLEN: Well, mainly, I tried to explain what it is that we're contemplating. It's still something being discussed in the administration and the timing of it is not- is not yet certain. But I wanted to explain to my Chinese counterparts that if we go forward with these- with this executive order, that we will do so in a transparent and narrowly targeted way.

MARGARET BRENNAN: Does that mean there's a chance that the Biden administration will drop it, that they won't issue this executive order?

TREASURY SECRETARY YELLEN: Well, no final decision has been made. But as I've said previously, this is something we're looking at very carefully.

MARGARET BRENNAN: Okay. You did mention there an action China just took in regard to export controls, meaning they- they have this stranglehold on a lot of critical minerals, and they just blocked the export of two of them that are really essential for computer chips.

TREASURY SECRETARY YELLEN: Yes.

MARGARET BRENNAN: How should people understand this is- is this a warning shot? Is this Beijing saying, look at what we can do. And if you take further restrictions, we'll ramp it up from here?

TREASURY SECRETARY YELLEN: Well, I certainly expressed concern about this action, and contrasted it with the actions that we've taken. Our own actions are narrowly targeted to address national security concerns, and I- it's not clear that the actions that the Chinese took are similarly narrowly targeted at their national security concerns. So this is an area that I expressed concern about.

MARGARET BRENNAN: Do you mean, are you suggesting there, that it was just a retaliatory action?

TREASURY SECRETARY YELLEN: Well, potentially.

MARGARET BRENNAN: Are you concerned that this is the beginning of an escalation?

TREASURY SECRETARY YELLEN: Well, my purpose is to make sure that we don't engage in a series of unintended escalatory actions that will be harmful to our overall economic relationship with one another. And we have had very little contact, both senior officials, and also just the American people and the Chinese people who've had very little contact with one another over the last several years, in part because of COVID. And that's a situation where misunderstandings can develop. We have a new team on the economic side in Beijing, that it's important to establish person to person relationships, and to open ongoing channels of communication, where concerns can be aired and discussed. And I do think my trip has been successful in forging those relationships and creating the opportunity for a deeper set of more frequent contacts at our staff levels.

MARGARET BRENNAN: Well, it is mean, this is the most consequential geopolitical relationship and economic one. So I understand why you're choosing your words very carefully here. But when you come to that bigger question of how to protect US national security, how do you do it in a way that doesn't also hurt opportunities for American businesses who want to keep profiting off of China?

TREASURY SECRETARY YELLEN: Well, there are many opportunities for American businesses to make profits in China. China has an enormous market. It's a significant share of the global economy, and we want to make sure that American businesses and workers can profit from that, and contribute also to China's success as well as our own. But there are areas where national security really demands that the most advanced technologies with military applications, we need to withhold to protect our own national security. And we have acted and will continue to act to do that.

MARGARET BRENNAN: I was just in China, I know how much concern there is there about the slowing of the economy. Are you concerned that the slowdown in China will have a negative impact and drag U.S. growth?

TREASURY SECRETARY YELLEN: Well, that is a topic that I discussed with my Chinese counterparts. We talked about the policy actions that they think- see as appropriate to stimulate their economy and promote what the describe as high-quality growth, and I was able to better understand the actions that they do think are appropriate. But of course, China's growth is critical to many countries around the world. It's an important driver of overall global growth and opportunities for many countries to export to China.

MARGARET BRENNAN: And they just--

TREASURY SECRETARY YELLEN: It is a- it is an important issue.

MARGARET BRENNAN: Indeed, and they just cut interest rates to try to stimulate some growth. How significant are the problems in the Chinese economy?

TREASURY SECRETARY YELLEN: You know, I- I think that they have opened up their economy following its closure from COVID and are working through a series of issues relating to issues in the property sector in real estate and consumer spending there his rebounded a little bit less. Consumers are showing more caution and saving, saving more than many commentators expected, many economic forecasters expected, but my counterparts talked about their perspective on this in the actions that they're taking.

MARGARET BRENNAN: Before I let you go, I do want to ask you about the economy here at home. What signals should Americans at home be looking for to understand that economic growth will be back at a point like it was before the pandemic?

TREASURY SECRETARY YELLEN: Well, you know, the economy before the pandemic was operating at what I would describe as full employment, with very low unemployment growth- very low unemployment rates, and growth at moderate levels. When the pandemic struck, there was huge job loss and a contraction in our economy. And as recovery took place, due to President Biden's economic policies, and success with our vaccination effort, there was a very rapid, a dramatic rebound, the labor market recovered. And now growth has slowed somewhat back to more normal levels, because we've put Americans back to work, we have a labor market that is functioning at a very high level, created almost 13 and a half million jobs since President Biden took office, with an unemployment rate that's close to the lowest level in the last 50 years. So, it's appropriate and normal that growth should moderate, but we have a healthy economy, a great labor market, inflation too high, and a concern of ours and the American people, but coming down over time, and it's my hope that, and belief, that there is a path to bring inflation down in the context of a healthy labor market and the data that I've seen suggests we're on that path.

MARGARET BRENNAN: The jobs number did suggest a little bit of a slowdown there, is the risk of recession completely off the table from your point of view? I mean, where do you put the odds?

TREASURY SECRETARY YELLEN: It's not completely off the table. But we would expect, with the job market as strong as it is now, to see a slower pace of ongoing job gains. Prime age labor force participation is at the highest level in several decades, so we've seen this strong job market attract workers back to it. But as- as that stabilizes at a high level, we should expect the monthly job gains to be coming down toward a more normal level.

MARGARET BRENNAN: Madam Secretary, I have so many more questions for you, but you have a long trip ahead of you and it's quite late. So thank you for your time.

TREASURY SECRETARY YELLEN: Thank you, Margaret.