Janet Yellen, the U.S. Treasury Secretary, met with her Chinese counterpart on Wednesday and promised to work together to “prevent competition becoming anything ever near war” as they try to thaw their relations.

Yellen met with Vice Premier Liu He in Zurich for the first time since the presidents of both countries agreed to explore areas of cooperation last November.

Liu stated that he was open to working together to find common ground between China, the U.S. and other countries.

According to a U.S. Treasury report, the two sides agreed to work together on financing issues for battling climate change. They also agreed to help “developing countries” in their clean energy transitions. Yellen is expected to travel to China in the near future and will welcome her counterparts from the U.S.

As the U.S. economy and China struggle with different but interrelated challenges in trade, technology, and other areas, this meeting is timely.

In her opening remarks before reporters, Yellen stated that while there are areas of disagreement and will communicate them to Liu, “we should not allow misunderstandings, especially those that stem from a lack communication, unnecessarily to worsen our bilateral financial and economic relationship.”

Liu expressed concern about U.S. trade, technology, and economic policies towards China and stated that he hoped that the U.S. would pay more attention to the effects of these policies on both sides.

He also called for honest communication. The Chinese broadcaster Phoenix TV stated in an online report that he said both sides should look at the bigger picture to ensure stability in relations.

Yellen stated that the two countries have a responsibility to manage their differences and prevent conflict from arising.

Both economies face challenges.

After a COVID-19-induced resurgence that killed thousands and closed down countless businesses, the Chinese economy is now reopening. The U.S. is slowly regaining its 40-year-high inflation levels and is now on track to reach its statutory debt limit. This will set up a political battle between the Republicans and Democrats in Congress. Asia is particularly interested in the U.S.’s debt issue, since China is the second largest holder.

The Russian invasion of Ukraine has also hampered global economic growth. This has prompted the U.S. to reach an agreement with its allies on an oil price limit on Russia as a retaliation. China is now seen as a friend and economic ally.

High interest rates worldwide have put pressure on countries that are heavily indebted to China, which has increased their debt burden.

An official from the Treasury who was present at the meeting said that part of the discussion focused on China’s debt and how to understand China’s concerns regarding renegotiating that debt. According to the Treasury official, Chinese officials sound optimistic about normal economic growth once its strict coronavirus panademic policies have been lifted.

As economic recession is threatening nations all over the globe, the stakes for cooperation are high.

“A wrong policy decision or a reverse in the positive data could lead to the global economy heading into a recession 2023,” stated Josh Lipsky, senior director at the Atlantic Council’s GeoEconomics Center. “Both countries share a common interest in avoiding this scenario.”

Last week, the World Bank reported that the global economy would be “perilously close to” a recession in this year’s economic cycle. This was due to weaker growth in all major economies around the world — including the U.S.A and China. According to the report, superpowers’ economic downturns are likely to affect low-income countries.

Lipsky stated Wednesday that debt restructuring was a high priority in the talks. Many low-income countries face the risk of defaulting on their debts in 2023, and many owe substantial amounts to China.

“Leaders have tried for two years to reach an agreement and avoid defaults. But there has been little success. One reason is China’s indecisiveness. Lipsky stated that Yellen will press Liu He to discuss this at the meeting.

In Tuesday’s address at the World Economic Forum, Davos (Switzerland), Liu presented an optimistic vision of the world’s second largest economy.

We are optimistic that China’s growth will return to normal if we work hard enough. He said that the Chinese economy would see significant improvements.

After her stop in Switzerland Yellen will travel this week to South Africa, Senegal, and Zambia. This will be her first visit to sub-Saharan Africa by officials from the Biden administration.

China is Zambia’s biggest creditor and it is currently renegotiating its debt of nearly $6 billion. Yellen reports that President Hakainde Hichilema, Zambia’s President, and Yellen discussed the need to address debt sustainability in a closed-door meeting at Washington’s Africa Leaders Summit.

The Zurich talks follow the November meeting between President Joe Biden, China’s Xi Jinping at the Group of 20 summit in Bali. They agreed to give key officials the power to collaborate on potential areas, such as tackling climate change, maintaining global financial, food, and health stability, and other issues. In protest of Nancy Pelosi’s August trip to Taiwan, the then-House Speaker, Beijing cut all contact with the U.S.

“We will compete vigorously. Biden stated at the time that he was not looking for conflict.

Antony Blinken, U.S. Secretary Of State, will travel to China in February.

Among other economic issues, the Biden administration has blocked the sale to China of advanced computer chips and is now considering banning investment in certain Chinese tech companies. This could be a violation of a key economic goal set by Xi. Tensions have been heightened by statements made by the Democratic president that America would defend Taiwan from a Chinese invasion.

Despite the fact that the U.S. Congress remains divided on many issues last week, House members agreed to continue to scrutinize Chinese investments.

Kevin McCarthy (Republican from California) has named the Communist Party of China, the House’s new Speaker, as one of the House’s “long-term challenges”, along with the national debt.

The U.S. Commerce Department included dozens of Chinese high tech companies to its export control blacklist last year. These include manufacturers of aviation equipment and chemicals.