Janet Yellen says free market reforms needed in China, country has 'unfair economic practices'

U.S. Treasury Secretary Janet Yellen called for more free market reforms in China on Friday, and said the country had unfair economic practices. 

"We seek healthy economic competition that is not winner-take-all but that, with a fair set of rules, can benefit both countries over time," Yellen told Chinese Premier Li Qiang in a meeting, according to Reuters.

Yellen arrived in China on Thursday to discuss repairing relations between the U.S. and Chinese governments. She referred to China's economic practices as unfair in public remarks, according to reports.

"Strengthening cooperation is the realistic need and correct choice of China and the United States ... to inject stability and positive energy into China-U.S. relations," said top Chinese central banker Yi Gang, according to state media.

China's finance ministry said in a statement Friday that the United States must proceed with "concrete actions" to pave the way for a healthy development of economic and trade ties.

"No winners emerge from a trade war or from decoupling and 'breaking chains,'" the statement said, according to Reuters. 

Yellen also urged Beijing to adopt more market-oriented approaches to its economy. 

"A shift toward market reforms would be in China's interests," she said during an American Chamber of Commerce in China (AmCham) event.

"A market-based approach helped spur rapid growth in China and helped lift hundreds of millions of people out of poverty," Yellen continued. "This is a remarkable economic success story."

This trip comes at a time of diplomatic tension between the two countries following the U.S. shooting down a Chinese spy balloon that had crossed over the U.S. earlier this year, and China's continued support of Russia in its war against Ukraine. Other concerning issues include new Chinese export controls on critical minerals used in making semiconductors and the communist country's ongoing practices such as stealing U.S. intellectual property.

Yellen's trip follows Secretary of State Antony Blinken's recent trip to China and precedes a possible meeting between President Joe Biden and Xi at the Group of 20 Summit in New Delhi in September or at the Asia-Pacific Economic Cooperation gathering planned for November in San Francisco.

"We seek to diversify, not to decouple," Yellen said. "A decoupling of the world's two largest economies would be destabilizing for the global economy, and it would be virtually impossible to undertake."