Thursday, December 4, 2008
China appeals to Washington to reform economy, protect Chinese assets at high-level talks
China promised more currency reform to ease trade tensions but told Washington to get its own economy in order as the two sides opened high-level economic talks Thursday amid a global financial crisis.
The unusual Chinese appeal at the Strategic Economic Dialogue highlighted the close links between the world's largest and fourth-largest economies and the global importance of their ability to keep relations smooth.
China's envoy, Vice Premier Wang Qishan, said Beijing was contributing to global stability by keeping its own economy growing strongly.
The chief U.S. envoy, Treasury Secretary Henry Paulson, said engagement between China and the United States has helped in managing the crisis. Officials said both sides stressed the importance of cooperation to combat a potential rise in trade protectionism.
But in unusually pointed language, China's central bank governor, Zhou Xiaochuan, blamed the crisis on U.S. financial excesses and said they should be fixed.
"The important reasons for the U.S. financial crisis include excessive consumption and high leverage," Zhou said in a speech to the meeting, according to Jin Qi, a central bank official who briefed reporters. "The United States should speed up domestic adjustment, raise its savings rate and reduce its trade and fiscal deficits."
The two-day meeting was not expected to produce breakthroughs on trade or other sensitive issues. The two sides signed a pact Thursday to cooperate in financing for projects to improve energy efficiency and were due to work Friday on an investment treaty.
Speaking earlier as Paulson listened, Wang appealed to Washington to "take the necessary measures to stabilize the economy and financial markets, as well as to guarantee the safety of China's assets and investments in the United States."
Wang did not elaborate, but Beijing owns $585 billion in Treasury debt that has helped to finance U.S. budget deficits, and a weak dollar and financial turmoil have fueled Chinese anxiety about such investments.
U.S. officials said the Chinese side promised more currency reforms. Washington and other trading partners say China's yuan is kept undervalued, giving its exporters an unfair price advantage and adding to its trade surplus. Some American lawmakers are calling for punitive action against Beijing.
"The Chinese continued to reinforce to us that they were committed to continued reform, and by that I mean continued appreciation (of the yuan) over time," said an American official who briefed reporters on condition he not be identified further.
The American officials said they did not know details of what Wang meant by protecting Chinese investments. But they said there was extensive discussion of steps the United States was taking to stabilize its economy.
The yuan has risen 20 percent against the dollar since Beijing cut its peg to the dollar in July 2005. But it has fallen this week in government-controlled trading -- including a nearly 1 percent decline Monday, its biggest one-day drop in three years -- in what analysts suggested was a message from Beijing to go easy on the issue.
The yuan's drop Monday also might have been meant as a warning to President-elect Barack Obama, that talks will be more effective than confrontation, said Frank F.X. Gong, chief Asia economist for JP Morgan Securities Ltd.
Obama has yet to say whether he will continue the dialogue. Some analysts have speculated that Obama and the U.S. Congress will take a harder line on China.
China's economic growth is expected to slow this year to about 9 percent, down from last year's 11.9 percent. Communist leaders worry about rising job losses, especially in export industries, and the possibility of unrest.
Beijing is launching a 4 trillion yuan ($586 billion) stimulus package meant to revive slowing growth through heavy spending on construction and other projects.
"We have always believed that if China can manage its own affairs well and maintain relatively stable and fast development of the domestic economy, that is itself the biggest contribution we can make to international economic and financial stability," said Jin, the central bank official.
Paulson is accompanied by U.S. secretaries of agriculture, labor and health, the U.S. trade representative, officials of the Treasury and Commerce departments, and others.
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