Reuters-US Treasurys Yellen Chinese Vice Premier He to meet ahead of APEC summit

U.S. Treasury Secretary Janet Yellen will begin two days of meetings with Chinese Vice Premier He Lifeng on Thursday in a bid to limit the economic fallout from tensions between Washington and Beijing and keep the lines of communication open on topics from national security to climate change.

U.S. Treasury officials have sought to downplay expectations for any breakthroughs from the meetings in San Francisco, where U.S. President Joe Biden next week will host a summit of Asia-Pacific Economic Cooperation (APEC) country leaders, including Chinese President Xi Jinping.

Biden and Xi are expected to steal the spotlight with a planned meeting on the summit sidelines. Yellen's second face-to-face meeting with He since she visited Beijing in July is among a series of cabinet-level engagements that paved the way for the two leaders to meet.

Yellen intends to reiterate her view that the U.S. and China cannot decouple and instead must pursue a "healthy competition" based on a level playing field and clear communications about their intentions regarding national security restrictions.

She said last week that the Biden administration would not choose a path of separation that would force Asian economies to choose between China and the U.S.

Her San Francisco meetings will mark the first in-person gatherings of new U.S.-China economic and financial forums involving staff-level officials from both sides after their launch in October.

But in announcing the consultations, Yellen said this would not be a recreation of the Obama administration's U.S.-China Strategic and Economic Dialogue, a broad forum that was widely criticized for its ineffectiveness.

A U.S. Treasury official said that a key goal for the meetings was deepening communications with China, gaining a better understanding of the relationship, and avoiding any misunderstandings about U.S. policy decisions.

Kelly Ann Shaw, a former White House trade adviser to former President Donald Trump, said it was important for Yellen to re-engage with China, but that the meeting would do little to change the overall trajectory of U.S.-China relations.

"This relationship is fundamentally fractured. And I think it's going to stay that way for the foreseeable future," said Shaw, a partner at law firm Hogan Lovells.

"So it's about figuring out, what do we want this relationship to look like knowing that? And just because you don't like each other doesn't mean you can't get along where your interests align."

Yellen said in an opinion piece published by the Washington Post on Monday that global challenges presented areas for potential U.S.-China cooperation, including climate change, debt relief for poor countries and the stemming of illicit financial flows to terrorism and illegal drugs.

But Yellen also said she would raise U.S. objections to Chinese state subsidies and other economic policies.

"This week, I will speak to my counterpart about our serious concerns with Beijing's unfair economic practices, including its large-scale use of non-market tools, its barriers to market access, and its coercive actions against U.S. firms in China," Yellen wrote.

The meetings are being held just days after the U.S. Treasury's semi-annual currency report chided China over a lack of transparency in its foreign exchange intervention practices. But the Treasury report said no major trading partners, including China, met the thresholds for currency manipulation.