HONG KONG—The U.S. and China are engaged in a confidence-building exercise that could show whether the world’s two largest economies can work together on shared priorities despite deep disagreements and a badly strained bilateral relationship.
Washington and Beijing are to co-chair a G-20 study group focusing on climate-related financial risks. It is a cautious step in a low-stakes venue. Still, neither country is eager to take credit for even such a modest initiative, underscoring sensitivities on both sides about any outreach.
Last month, U.S. Treasury Secretary Janet Yellen told her G-20 counterparts the U.S. would co-chair the group. A day later, Chinese central bank governor Yi Gang said the bank was pleased to co-lead the group. Neither side mentioned the other in their announcements.
“Both sides are inching closer to each other and trying to make climate a safe lane for communication,” said John Podesta, founder of the left-leaning Center for American Progress think tank in Washington.
The U.S. views China as its major competitor. A new Biden administration strategy document labeled China the only rival potentially capable of combining economic, diplomatic, military and technological power “to mount a sustained challenge to a stable and open international system.”
China has been trying to wean itself from dependence on U.S. technology and make clear to the new administration that it won’t back off on issues of human rights or Taiwan, a democratic, self-governing island that Beijing views as part of China.
Still, both Beijing and the Biden administration have talked about the urgency of addressing climate change, and the need to work together on the issue.
In response to questions, the State Department pointed to remarks by Secretary of State Antony Blinken last week calling for the U.S.-China relationship to “be competitive when it should be, collaborative when it can be, and adversarial when it must be.” Spokespeople for the Treasury Department declined to comment.
On Sunday, Chinese Foreign Minister Wang Yi described climate change as a common cause that could help improve U.S.-China relations.
Chinese leader Xi Jinping said in September that China would achieve carbon neutrality—net zero carbon-dioxide emissions—by 2060, with emissions peaking before 2030. Since then, Beijing has sent other signals pointing to a turn in its domestic energy policy.
The U.S. has recently agreed to rejoin the Paris climate agreement, though the accord is criticized by climate activists who say the commitments countries have made are insufficient for keeping the world from warming by 2° Celsius, the benchmark that many of them cite.
Climate advocates have also expressed concern about Beijing’s commitment to fighting climate change overseas. Since 2000, Chinese policy banks have extended nearly $52 billion in loans to support coal projects through its Belt and Road Initiative, according to Boston University’s Global Development Policy Center.
In December, researchers at China’s environment ministry and international climate advocates called for more stringent environmental criteria for Beijing’s overseas investments. Senior Chinese government officials attended the report’s launch event, which has been interpreted as a signal of Beijing’s willingness to reconsider its overseas climate impact.
Last month, Beijing appointed Xie Zhenhua, who served as China’s climate envoy from 2007 to 2018 and knows the new U.S. climate czar John Kerry from negotiations over the Paris Agreement.
Throughout 2020, Messrs. Kerry and Xie and their confidantes were in regular communication, according to people familiar with the matter, exchanging ideas and sounding out one another’s positions as the possibility of a Biden victory became apparent.
The two men have since been in direct contact, China’s Foreign Ministry said last month, while Mr. Kerry has praised Mr. Xie as “a capable advocate.”
It isn’t clear who the U.S. will name as the co-chair of the G-20 working group.
On China’s side, the co-chair will be Ma Jun, a World Bank veteran and former chief economist at the People’s Bank of China who is an expert on environmentally sustainable finance and adviser on the report in December calling for stricter environmental criteria for Chinese overseas investments.
Mr. Ma, who confirmed his appointment as China’s representative on the G-20 study group in an interview, said the U.S. Treasury Department and China’s central bank each proposed—independently from one another—upgrading the G-20 study group to a working group, which unlike a study group can make concrete policy recommendations. The full G-20 is expected to approve the change, though the group’s agenda hasn’t yet been set.
The People’s Bank of China didn’t immediately respond to a request for comment.
—Bob Davis in Washington contributed to this article.
Write to Sha Hua at firstname.lastname@example.org
Copyright ©2020 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8