Beijing tells US to put fiscal house in order, control deficit
Europe's debt crisis has laid bare the fragility of global finances and the US, too, must tame its fiscal deficit, Assistant Finance Minister Zhu Guangyao said on Thursday, spelling out Beijing's concerns before talks with Washington.business Updated: May 20, 2010 21:19 IST
Europe's debt crisis has laid bare the fragility of global finances and the US, too, must tame its fiscal deficit, Assistant Finance Minister Zhu Guangyao said on Thursday, spelling out Beijing's concerns before talks with Washington.
With China facing US criticism for yoking its currency to a de facto dollar peg, Zhu shifted attention to Beijing's own worries about the euro zone's woes and Washington's rising indebtedness, ahead of the two countries' economic dialogue next week.
China wants "quiet discussions" about exchange rate issues, and loud lobbying will only delay movement on the yuan, Zhu said.
"External pressure and noise will do nothing but slow the reform process," he said of the yuan exchange rate.
The global economy's priority should be to steady financial conditions in Europe after Greece's debt crisis, Zhu said. The US also needs to control its fiscal settings, he said. "The European sovereign debt crisis is a challenge not just for the countries that are party to it, such as Greece. In fact, it is a challenge to the stability of the entire international financial market."
"We have noted that President (Barack) Obama and Treasury Secretary (Timothy) Geithner have stressed they are paying attention to the problem of the excessively high US fiscal deficit, which was also a matter of concern to China."
"We hope that the US fiscal deficit will fall as a proportion of GDP (gross domestic product) as the economy recovers and reach a sustainable level," said Zhu.
The US budget deficit hit $1.4 trillion in 2009, 10 per cent of the economy. The White House projects the deficit will reach $1.6 trillion this year.
Chinese Vice-Premier Wang Qishan, a leading economic decision-maker, has had many "frank exchanges" with Geithner about the US debt burden, said Zhu.
China wants to improve coordinating economic policies with the US as a buffer against global turbulence and would like the G20 to play a role in strengthening the global response, Zhu said.
China is the world's largest holder of US Treasuries with $895.2 billion. It added to its stockpile in March for the first time in seven months.