Despite bilateral tensions, record high U.S.-Chinese trade last year showed there was "ample room" to engage in trade and investment, and it was critical to focus on areas of common interest and address disagreements through dialogue, Yellen told Chinese Premier He Lifeng at the start of a meeting that a Treasury official said would last for more than three hours.

Yellen's visit through Sunday is Washington's latest attempt to repair ties between the world's two biggest economies, battered over issues from Taiwan to technology that have drawn their allies into their rivalry, having an impact on companies and trade ties.

Like U.S. Secretary of State Antony Blinken, who visited last month for the first time in Joe Biden's presidency, Yellen is seeking a delicate balance between conciliation and continuing to push Beijing to halt practices Washington says are harmful to U.S. and Western companies.

Both sides have downplayed expectations for breakthroughs, while hailing the opportunity for candid, face-to-face diplomacy.

"Amid a complicated global economic outlook, there is a pressing need for the two largest economies to closely communicate and exchange views on our responses to various challenges," Yellen told He, China's recently appointed economy czar.

Doing so could "help both sides more fully understand the global economic outlook and make better decisions to strengthen our economies", she said.

At the same time, Yellen reiterated Washington wanted to ensure healthy competition with a "fair set of rules" that would benefit both countries over time.

Meeting her at the Diaoyutai state guest house where foreign dignitaries are often received, He said he stood ready to work with Yellen.

Yellen told a group of female economists on Saturday she was "in Beijing at this critical time because, for all the disagreements between our nations, President Biden and I believe it is in the best interests of our peoples to put our relationship on a better track and to maintain open and honest lines of communication".

"I strongly believe that the relationship between our two countries is rooted in the solid ties between the American and Chinese people. It is important that we keep nurturing and deepening these ties, especially as China reopens after three years of COVID lockdowns."

China's economy has failed to rebound as strongly as expected, heightening the risk of a global slowdown.

'MEET CHINA HALFWAY'

As the U.S. seeks to re-engage at all levels, Beijing has repeatedly told Washington to match words with action, pointing to continued U.S. moves to curb Chinese access to technologies including semiconductors.

Beijing has also refused to resume bilateral military ties, while tariffs imposed on Chinese products during a trade war under Biden's predecessor, Donald Trump, remain intact.

Before Yellen's arrival, China this week abruptly announced export controls on two metals widely used in semiconductors and electric vehicles in the name of protecting its national security and interests.

Still, recently appointed Premier Li Qiang left the door open to further dialogue, urging Yellen on Friday to "meet China halfway" as both sides inject "positive energy" into bilateral ties.

Despite talk of U.S.-China economic decoupling, which both countries oppose, data show a fundamentally solid trade relationship, with two-way trade hitting $690 billion last year.

The United States would continue to communicate directly its concerns about specific economic practices, and would take targeted actions to protect its national security, Yellen said.

She urged China not to allow any disagreements to "lead to misunderstandings, particularly those stemming from a lack of communication, which can unnecessarily worsen our bilateral economic and financial relationship."

Yellen told government officials and climate experts on Saturday that China had the capacity to help the world tackle the "existential threat" of climate change.

Beijing and Washington must take the lead in helping poor nations meet their climate goals and cope with the impact of climate change, she told a roundtable.

Cooperation on climate finance was a "critical" responsibility of "the world's two largest emitters of greenhouse gases and the largest investors in renewable energy", she said.

China, classified as a developing country by the United Nations, has long said it was the responsibility of developed nations to help poor countries pay to address climate change.

But Beijing says it could contribute to "loss and damage" due to climate change on a voluntary basis.