International Herald Tribune
China urged the United States on Thursday to spare no effort to stabilize its economy and financial markets to help avert a global recession.
Speaking at the start of a fifth meeting of the cabinet-level "strategic economic dialogue" between the United States and China, the deputy prime minister, Wang Qishan, said Beijing was doing its part by pursuing fast growth.
The U.S. Treasury secretary, Henry Paulson Jr. , whose term in office is rapidly drawing to a close, praised China for its efforts to support the global economy.
U.S. officials said later that China had given reassurances that it remained committed to reforming its currency control mechanisms along market lines. Washington wants greater currency flexibility to lead to a rise in the value of the yuan, something it regards as essential for shrinking China's huge trade surpluses.
"There's been progress. China continues to reinforce to us that they remain committed to reform," a U.S. official said to reporters. "By that I mean appreciation over time."
Zhou Xiaochuan, the Chinese central bank governor, expressed confidence that China could sustain growth and financial stability, a Chinese official said to reporters. But Zhou said policy makers needed to take "timely, effective and pre-emptive measures."
"In particular they need to prepare for the worst," Jin Qi, head of the bank's international department, quoted Zhou as adding.
Earlier, Wang reiterated Beijing's position that the best way China could contribute to a healthier global economy was maintaining its fast growth.
He said that Beijing backed U.S. initiatives to steady world markets and that China was trying to achieve the same goal. But he urged Washington in return to heed Beijing's needs. "I hope the United States will take all necessary measures to stabilize its economy and financial markets as soon as possible and to ensure the security of Chinese investments and interests in the United States."
Stephen Green, head of China research at Standard Chartered Bank in Shanghai, noted that these comments came soon after a drop in the value of the yuan, engineered by the central bank, and a day after the head of China's sovereign wealth fund said the constantly shifting U.S. regulatory landscape made him too nervous to buy into U.S. financial firms.
There is longstanding concern in some Chinese circles about Washington's stewardship of the dollar, unease at the pressure the United States puts on Beijing over the yuan and a debate over whether China should add to its U.S. debt holdings. Beijing holds more than 60 percent of its $2 trillion of reserves in dollar assets, with a big chunk in debt issued by the Treasury and the troubled mortgage lenders Fannie Mae and Freddie Mac, which have effectively been taken over by the U.S. government.
Despite their concern over the health of Fannie and Freddie, senior Chinese officials have reiterated that it is in China's self-interest to keep investing in U.S. government securities. But others in China worry that, with Washington pursuing aggressive fiscal and monetary expansion, the value of those bond holdings will eventually be eroded.
The United States is now officially in recession, as is much of Europe, and Paulson said the financial crisis that originated in U.S. subprime mortgage lending markets was truly "a global event" that required a global response.
"International cooperation and coordination have been robust, and we appreciate the responsible role China has played during the turmoil," he said.
China has introduced a stimulus package worth 4 trillion yuan, or $586 billion, and cut interest rates to bolster domestic demand and take up slack in the economy left by weakening exports.
"China will strive to boost domestic demand, change its economic growth model and maintain stable and fast economic growth," Wang said, "which in itself is a huge contribution to the stable financial and economic development of the world."
Paulson said the two days of talks would focus on the building blocks for an enduring bilateral economic partnership. For the first time, he said, the dialogue would focus on how the two governments can work together through international forums to strengthen the global economic system.
He said he expected to reach substantive agreements in five areas: electricity generation, transportation, clean water, clean air and protecting wetlands and other natural areas.
The World Bank cut its growth forecast for China last week to 7.5 percent in 2009 from a 9.2 percent estimate in June, citing a slowdown in domestic investment and exports. CLSA Asia-Pacific Markets estimates the economy could expand by as little as 5.5 percent next year, the least since 1990.
In his speech to the meeting, Zhou urged the United States to resolve the imbalances in its own economy, according to Jin, the official.
"Overconsumption and a high reliance on credit is the cause of the U.S. financial crisis," Zhou said. "As the largest and most important economy in the world, the U.S. should take the initiative to adjust its policies, raise its savings ratio appropriately and reduce its trade and fiscal deficits."
Central bank officials said Zhou left for the United States immediately after his speech to attend a meeting of the Group of 30. The organization's Web site describes the group as a "private, nonprofit, international body composed of very senior representatives of the private and public sectors and academia."
5 December 2008