GEOFF BENNETT: This week is an important moment in the strained and often tense relationship between the U.S. and China.

President Biden and Chinese President Xi Jinping will meet face-to-face in San Francisco on Wednesday as part of the Asia-Pacific Economic Conference, or APEC summit.

Treasury Secretary Janet Yellen is there already and has been meeting with Chinese officials.

I spoke with her a short time ago.

Secretary Yellen, welcome back to the "NewsHour."

JANET YELLEN, U.S. Treasury Secretary: Thank you so much, Geoff.

GEOFF BENNETT: President Biden has repeatedly framed his vision of the world as a struggle between autocracies and democracies.

And he's placed the U.S. in opposition to countries like Russia and China.

Why is engaging with China now the right strategy?

JANET YELLEN: Well, even if we disagree about something as fundamental as democracy versus autocracy, we need to have constructive relationships with one another.

We have a deep economic relationship and financial relationship that is generally beneficial, both to China and the United States, although we insist that it be one that's fair with a level playing field, so that American workers aren't disadvantaged.

But we have a productive competition between the United States and China.

We want to make sure that that continues.

At the same time, we intend to protect our national security.

And it's important for China to understand that we're doing that, that it's really nonnegotiable, but that we try to do it in ways that are targeted, narrow, and not designed to harm the Chinese people broadly or to inhibit their growth.

So there are many areas in which we can and should cooperate, and the meeting is -- the meeting, I'm sure, will address all of these points.

GEOFF BENNETT: And there are those who say that the U.S. should actually sever economic ties with China or decouple our economy from China's.

What do you make of that approach?

JANET YELLEN: I think it would be disastrous for both the United States and China and for the global economy more broadly.

I do not think that we should try to decouple.

I think that would be dangerous and counterproductive.

I visited Beijing a year ago following President Biden's and President Xi's decision that economics and finance are areas where we should regularly communicate.

And I think we have opened up productive channels.

We have established economic and financial working groups that are meeting to try to address these issues constructively.

GEOFF BENNETT: The commerce secretary, Gina Raimondo, has said that U.S. firms have complained to her that China is, in their view, uninvestable, pointing to fines and raids and other actions that have made it too risky to do business there.

How do you see it?

JANET YELLEN: Well, I think China has taken actions against U.S. firms that seem arbitrary and retaliatory.

And it certainly is a concern that I too have heard from American businesses.

At this point, I think China is concerned about this potential exodus of American firms and really seeks to stabilize the relationship and to make sure that it continues to be a welcoming environment for American and other foreign firms in China.

And so an objective of our meeting certainly is to try to address these issues that are of concern to American businesses legitimately.

GEOFF BENNETT: On another matter, you have said that the U.S. government has seen evidence that Chinese firms may be aiding in the flow of equipment to Russia as part of its war effort in Ukraine.

How is the U.S. planning to respond?

JANET YELLEN: We want our Chinese counterpart to be aware that we have detected activity that strongly suggests to us that there are some private Chinese firms that are helping direct military equipment to Russia and that we have great concern about that.

We would -- we're certainly prepared to sanction these firms who are potentially financial institutions that are helping them do this business.

But it would be easiest and best if China takes -- uses the information that we can provide to crack down on this activity themselves.

And I think we have an opportunity to work with the Chinese to counter this evasion.

GEOFF BENNETT: Inflation has fallen significantly from a peak of about 9 percent last summer, and that slowdown extended through October, according to a Labor Department report out today.

How much longer, though, will Americans have to grapple with the dual pressures of high inflation and high interest rates?

JANET YELLEN: Well, it's really critically important that inflation come down.

It's, first and foremost, the Fed's job to accomplish that.

But we're taking complementary actions ourselves, understanding that Americans are really suffering from higher prices.

Fortunately, gas prices now are down about $1.65 off their highs.

The Inflation Reduction Act has lowered health care costs, and more and more drugs are now coming down in price.

We see that inflation is coming down.

And we know that that's something that needs to continue.

GEOFF BENNETT: Treasury Secretary Janet Yellen joining us tonight from San Francisco, thanks for your time.

JANET YELLEN: Thank you.