Obama declares new era of co-operation with China

Author: By Martin Crutsinger, Associated Press

The Obama administration pledged to get control of the deficits once the
economic crisis is resolved. It also pressed China to reshape its economy to
rely more on domestic demand and less on exports that drive up the US trade
deficit.

Chinese Assistant Finance Minister Zhu Guangyao, briefing reporters after
Monday’s meetings, said the US and Chinese sides had “profound exchanges”
on the recovery of the US economy.

“We sincerely hope the US fiscal deficit will be reduced, year after year,”
Zhu said, speaking through an interpreter, after being asked if China was
worried about US recovery.

The discussions in Washington represent the continuation of a dialogue begun
by the Bush administration, which focused on economic tensions between the
two nations. Obama chose to expand the talks to include foreign policy
issues as well as economic disputes.

Top officials from both countries have called the relationship crucial to
solving many of the world’s crises. The Obama administration hopes the talks
can set the groundwork for cooperation on climate change, lifting the world
economy out of turmoil and addressing nuclear standoffs with North Korea and
Iran.

Both sides sought to underscore the importance of the revamped Strategic and
Economic Dialogue, with Obama delivering a major policy address to welcome a
sizable Chinese delegation of 150 diplomats.

"I believe that we are poised to make steady progress on some of the most
important issues of our times,” Obama told officials from both
countries assembled in the vast atrium of the Ronald Reagan Building.

“The relationship between the United States and China will shape the 21st
century, which makes it as important as any bilateral relationship in the
world,” Obama said.

Vice Premier Wang Qishan, China’s top economic policymaker, said his country’s
attempts to create a more open economy would help US recovery efforts.

“With the furthering of China’s reform and opening up, China and the
United States will have even closer economic cooperation and trade relations
and (the) China-US relationship will surely keep moving forward,” Wang
said, speaking through an interpreter.

Secretary of State Hillary Rodham Clinton and Treasury Secretary Timothy
Geithner were leading the US team. The Chinese delegation was led by Chinese
State Councilor Dai Bingguo and Wang.

Geithner and Wang both spoke of hopeful signs that the global economy was
beginning to emerge from its worst financial crisis since the Great
Depression.

Geithner said the stimulus packages put together by Beijing and Washington had
made a substantial contribution to fighting the global downturn and
represented a milestone in economic cooperation between the two nations.

The United States, the world’s largest economy, accounts for about 22 percent
of global output, and China around 7 percent. The combined impact of the
massive stimulus programs should make a difference, economists said, in
cushioning a recession that appears to be bottoming out in the United States
and some other countries.

Geithner traveled to Beijing last month to assure Chinese officials that
federal budget deficits, which have ballooned because of government efforts
to deal with the recession and stabilize the financial system, would be
reined in once those crises have passed.

He said Americans were already moving to boost their personal savings rates.
Economists have long argued that is necessary to controlling US trade
deficits because it means Americans are not consuming as much in imports
from China and other countries.

“We are committed to taking measures to maintaining greater personal
saving and to reducing the federal deficit to a sustainable level by 2013,”
Geithner said at the opening session of the talks.

Geithner did not spell out how the administration planned to accomplish those
objectives. Many private economists have said the Chinese are right to worry
about a US budget deficit that is projected to hit $1.85 trillion this year,
four-times the previous record, and under the administration’s estimates
will not dip below $500 billion over the next decade.

The Chinese, who have the largest foreign holdings of US Treasury debt at
$801.5 billion, have expressed worries that soaring deficits could spark
inflation or a sudden drop in the value of the dollar, thus jeopardizing
their investments.

Zhu told reporters, “The Chinese government is a responsible government,
and first and foremost our responsibility is the Chinese people, so of
course we are concerned about the security of the Chinese assets.”

The United States played down the issue of China’s currency, the yuan, which
American manufacturers contend is being kept at artificially low levels by
Beijing to gain trade advantages against the United States.

Both sides are trying to emphasize areas of agreement, in part to avoid
upsetting global financial markets during a period of stress for the world
economy.

Geithner did say that it would be a “huge contribution to more rapid,
balanced and sustained global growth” if China shifted toward more
domestic-led growth and away from the current extensive reliance on exports.

While Chinese officials have pledged to move in this direction, it was unclear
that the changes would be fast enough or substantial enough to satisfy US
demands.

The two nations are the world’s largest emitters of the pollution blamed for
global warming, but so far China has resisted calls to set specific caps on
emissions or to eliminate tariffs on clean energy technology that the United
States and other countries would like to sell them.

The administration did praise China for its help in the nuclear standoff with
North Korea. Clinton said the United States and China must work together to
stop North Korean “provocations.” She said both countries “appreciate
the dangers of escalating tensions” and a possible arms race in East
Asia.

While the US trade deficit with China has narrowed slightly this year, it is
still the largest imbalance with any country. Critics in Congress say unless
China does much more in the currency area, they will seek to pass
legislation to impose economic sanctions on Beijing, a move that could spark
a trade war.

Dai said the countries must work together to help solve the world’s problems.

Speaking through an interpreter, he noted that the countries are trying to
build better relations despite their very different social systems, cultures
and histories.

“Can we manage to do that? My answer is, we must work hard to make it
happen, and, yes, we can ? that is borrowed from President Obama.”
He added in English: “Yes, we can!”

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