By David Lawder and Andrea Shalal

WASHINGTON (Reuters) -The U.S. seeks “constructive and fair” economic ties with China, but will protect its national security interests and push back against Chinese actions to dominate foreign competitors, Treasury Secretary Janet Yellen said on Thursday.

Speaking at Johns Hopkins University’s School of Advanced International Studies, Yellen laid out the Biden administration’s principal objectives for what she called an “essential” economic relationship between the world’s two largest economies, as China strikes a more confrontational posture toward the United States and its allies.

“Our relationship is clearly at a tense moment,” Yellen said. “My goal is to be clear and honest, to cut through the noise and speak to this essential relationship, based on sober realities.”

She said she intended to travel to Beijing “at the appropriate time” to meet with her new Chinese counterparts to help “responsibly” manage the relationship, but Treasury offered no details on the timing of a trip.

Yellen made her remarks amid heightened tensions and pessimism in the U.S.-China relationship over national security issues, including Taiwan, Russia’s war in Ukraine, growing U.S. export bans on advanced technologies and China’s state-led industrial policies.

International Monetary Fund Managing Director Kristalina Georgieva warned last week that such tensions and supply chain “friend-shoring” could spill into a new Cold War that would stunt global growth.

Yellen contrasted strong U.S. growth with China’s slowing GDP output, arguing that the U.S. would remain the world’s unparalleled economic leader in metrics from wealth to technological innovation. But she said a growing China was in the interest of both countries, as long as it followed global rules.

She took aim at China’s “no limits” partnership with Russia, calling it “a worrisome indication that it is not serious” about ending Russia’s war against Ukraine.

“It is essential that China and other countries do not provide Russia with material support or assistance with sanctions evasion,” she said, warning that the consequences of any violations would be “severe.”

‘HEALTHY’ COMPETITION

Yellen’s remarks were the most comprehensive articulation of the Biden administration’s China strategy to date, marking a shift from a sense of “fatalism” and “great power competition” that has permeated the relationship, said Scott Kennedy, a China expert at the Center for Strategic and International Studies in Washington.

“This is no call to return to the previous policies of unconditional engagement,” Kennedy said. “It was quite tough and unapologetic about U.S. efforts to defend national security and human rights.”

Yellen said the administration sought to foster “healthy competition” and cooperation, where possible, on global issues such as climate change, debt relief and macroeconomic stability, though she labeled China a “roadblock” to debt restructurings for poor countries.

Washington will clearly communicate its concerns about China’s increased support for state-owned enterprises and domestic firms to dominate foreign competitors, as well as “aggressive” efforts to quire American technology, including through intellectual property theft, Yellen said.

But she underscored that Washington’s actions against China were motivated solely by national security concerns, not gaining a competitive economic advantage.

At the same time, she said the Biden administration was not seeking a “winner-take-all” competition, and believed that healthy economic competition with a fair set of rules could benefit both countries over time.

“Sports teams perform at a higher level when they consistently face top rivals. Firms produce better and cheaper goods when they compete for consumers,” she said.

(Reporting by Andrea Shalal; Editing by Jamie Freed, Paul Simao and Jonathan Oatis)

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