Published: Monday, 27 Jul 2009 | 9:08 AM ET Text Size By: CNBC.com With Reuters and AP
President Barack Obama said Monday that the United States and China shared mutual interests in a sustained economic recovery, and called for closer cooperation between the two countries.
“The current crisis has made it clear that the choices made within our borders reverberate across the global economy — and this is true not just of New York and Seattle, but Shanghai and Shenzhen as well,” Obama said in remarks at the start of U.S.-China talks in Washington.
“That is why we must remain committed to strong bilateral and multilateral coordination,” he said.
Earlier, Treasury Secretary Timothy Geithner said China can play a major role in restoring global growth by continuing to encourage more consumption at home and exporting less.
At the start of a two-day U.S.-China Strategic and Economic Dialogue, Geithner avoided any mention of sensitive currency issues and instead focused on encouraging Beijing to recognize that strapped U.S. consumers can’t keep powering the global economy.
“China’s success in shifting the structure of the economy towards domestic-led growth, including a greater role for spending by China’s citizens, will be a huge contribution to more rapid, balanced and sustained global growth,” he said.
Geithner is co-host along with Secretary of State Hillary Clinton at the mostly closed-door talks Monday and Tuesday.
The former Bush administration initiated twice-a-year talks in 2005 between financial chiefs of the two nations.
But the Obama administration broadened them to include a diplomatic dimension and cut the sessions to once a year, alternating between Washington and Beijing.
In a joint op-ed article in the Washington Post newspaper on Monday, Clinton and Geithner stressed the growing significance of close relations between the two countries as China’s economic and political might grows.
“Simply put, few global problems can be solved by the U.S. or China alone,” they wrote. “And few can be solved without the U.S. and China together.”
In that context, issues like containing North Korea’s nuclear ambitions rank in importance with persuading Beijing to tune back its exports of cheap consumer goods to the United States and to buy more abroad at these talks.
“The strength of the global economy, the health of the global environment, the stability of fragile states and the solution to nonproliferation challenges turn in large measure on cooperation between the U.S. and China,” Geithner and Clinton said.
In opening remarks before the meetings moved behind closed doors, Clinton said the talks were intended to put the dialogue between the two nations on a higher level, adding: “This dialogue…marks the beginning of an unprecedented effort to lay the foundation for a positive, cooperative and comprehensive U.S.-Chinese relationship in the 21st century.”
The two days of high-level talks between the US and China are expected to expose sharp differences on trade and soaring U.S. budget deficits, but the discussion could be more amicable in the area of foreign policy.
The Obama administration is going out of its way to praise Beijing for the help it has already provided on pressuring North Korea to abandon its nuclear program.
Secretary of State Clinton praised China on Sunday for being “positive and productive” in dealing with North Korea.
“We’ve been extremely gratified by their forward-leaning commitment to sanctions and the private messages that they have conveyed to the North Koreans,” Clinton said on NBC’s “Meet the Press.”
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Both sides are emphasizing the importance of the meetings. The Chinese are bringing 150 diplomats—one of the largest delegations it has ever assembled for discussions in Washington— and the administration will start the discussions with remarks Monday by President Barack Obama.
With the global economy mired in recession, the United States and China have enormous stakes in resolving tensions in such areas as America’s huge trade deficit with China and the Chinese government’s unease over America’s soaring budget deficits.
Other issues such as climate control will also be on the agenda. Both countries are the largest producers of the greenhouse gases blamed for global warming.
Three years ago, then-Treasury Secretary Henry Paulson used the initial U.S.-China talks to press Beijing to let its currency, the yuan, rise in value against the dollar to make it cheaper for Chinese to buy U.S. goods. U.S. manufacturers blame an undervalued yuan for record U.S. trade deficits with China—and, in part, for a decline in U.S. jobs.
The U.S. efforts have yielded mixed results. The yuan, after rising in value about 22 percent since 2005, has scarcely budged in the past year. Beijing had begun to fear that a stronger yuan could threaten its exports. Chinese exports already were under pressure from the global recession.
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But the Obama administration intends to remain focused on the trade gap, telling Beijing that it can’t rely on U.S. consumers to pull the global economy out of recession this time. In part, that’s because U.S. household savings rates are rising, shrinking consumer spending in this country.
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For the United States, suffering from a 9.5 percent unemployment rate, the ultimate goal is to help put more Americans to work.
While the U.S. 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 China, a move that could spark a trade war between the two nations.
Geithner and Clinton will be joined by their Chinese counterparts, Vice Premier Wang Qishan and State Councilor Dai Bingguo.
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For their part, Chinese officials are making clear they want further explanations of what the administration plans to do about the soaring U.S. budget deficits. China, the largest foreign holder of U.S. Treasury debt — $801.5 billion — wants to know that those holdings are safe and won’t be jeopardized in case of future inflation.
“The Chinese delegation, especially Vice Premier Wang, will make the request that the U.S. side should adopt responsible policies to ensure the basic stability of the exchange rate of the U.S. dollar and protect the safety of Chinese assets in the United States,” Zhu Guangyao, an assistant Chinese finance minister, told reporters in Beijing last week.
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The Chinese are likely to hear a repeat of the assurances Geithner gave them when he visited China last month. He said then that the administration is committed to cutting the U.S. budget deficit—expected to hit $1.84 trillion this year—in half once the emergency spending to ease the recession and the financial crisis are no longer needed.
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