"I do believe it's gotten closer," she told CNBC of the relationship between the world's two biggest economies.
"We've found ways to constructively discuss and address our differences."
This is in spite of intensifying competition between the United States and China in recent years.
President Joe Biden's administration has taken moves to limit Chinese firms' access to cutting-edge equipment, especially for military uses, and added on to tariffs on Chinese-made products introduced by his predecessor, Donald Trump.
In the run-up to the November election, in which Trump is facing off with Vice President Kamala Harris, both candidates have taken a firm stance on China.
But Yellen said of the current relationship: "We're cooperating in areas that the world needs us to work together. Financial stability is one of these areas."
On the US economy, Yellen told CNBC that all indications, ranging from the jobs market to growth figures, "suggest we're on a path to a soft landing" even if there remain risks.
"The last mile on inflation involves housing costs, and I believe there's good reason to think that they will fall," she said.
On Thursday, Yellen also called for regulation to boost the resilience of the US financial system.
"A resilient financial system is critical to a strong economy," she said at the Federal Reserve Bank of New York.
"And strengthening it requires insisting on thoughtful regulation, including in the face of challenges from those who advocate to roll back policies and regulations," she said.
Taking aim at Trump's first term in office, she said the Treasury's focus on financial stability "had all but disappeared" when she took office in 2021.
"Appropriate regulation is critical to supporting a resilient financial system that serves as an engine for innovation and growth," Yellen said.
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