U.S., China Agree on Reform Principles, Treasury Secretary Says
USINFO Staff Writer
Washington – The United States and China have agreed on basic principles covering a wide range of issues - including further economic reforms Beijing should implement to achieve balanced, sustainable growth - but differ on the timing of changes, says U.S. Treasury Secretary Henry Paulson.
“I am very pleased with what we’ve accomplished because we’ve got some immediate tangible results,” Paulson said at a December 15 press briefing in Beijing, following two days of negotiations between senior U.S. and Chinese officials.
Paulson released a statement at the conclusion of the talks, the initial session of the U.S.-China Strategic Economic Dialogue, an initiative first proposed in September by President Bush and Chinese President Hu Jintao. (See related article.)
The treasury secretary headed a U.S. delegation which included six other Cabinet-level officials and the chairman of the Federal Reserve in meetings with their Chinese counterparts, led by Vice Premier Wu Yi.
Paulson said China’s leaders agreed to move toward a growth strategy that will rely more on domestic consumption than exports, maintain high productivity, strengthen protection for intellectual property rights, and open up the service sector. That approach will help China successfully integrate into the global economy without contributing to global current account imbalances, he said.
According to Paulson, both countries pledged to address global current account imbalances by maintaining an open investment environment and by implementing other measures - the United States through policies increasing national savings, and China through efforts to increase domestic consumption and exchange rate flexibility.
In a speech before the Chinese Academy of Sciences December 15, Federal Reserve Chairman Ben Bernanke said China’s unusually high household savings rate and corresponding low level of consumption have aggravated economic imbalances "by depressing the demand for imports and by forcing domestic firms to look abroad for markets." According to Bernanke, China's leaders could reduce the country's high savings rate and raise living standards by expanding social services and creating incentives for more robust household consumption.
Such consumption would be boosted by policies allowing China's currency to strengthen, which would make imported goods cheaper and induce domestic companies to gear their production toward domestic rather than foreign markets, the U.S. central bank head said. (See full text.)
PACE OF REFORM AN OPEN QUESTION
Paulson said the United States stands ready to assist China in its transition to a market-based economy by sharing its experience in strengthening social safety net programs, liberalizing markets and developing cleaner, more abundant sources of energy.
He said the two sides share views on the need for further reforms, but differ on how fast they should proceed.
“We have a point of view that there’s more risk in going too slowly than there is in going too fast,” Paulson said. “The Chinese see that differently.”
At the briefing, Wu said remaining differences are “understandable” because the “actual situations of China and the United States are completely different.”
Despite remaining differences, Paulson said, the initial agreements and newly established relationship will make progress more achievable in the future.
“We leave here with greater confidence that we are on the right path,” Paulson said.
Some immediate results are “symbolic,” he said, but they are “symbolically important.”
Among such results, Paulson cited plans to open offices of the two principal U.S. stock exchanges in China and to launch a dialogue on encouraging investment and protecting investor rights in both countries.
The next session of the Strategic Economic Dialogue will take place in May 2007 in Washington, Paulson said. It will focus on “innovative societies,” trade and investment, and trade imbalances.
For more information on U.S. policies, see The United States and China.