China is urging Washington to rein in debt-fueled spending and stabilize its economy in high-level talks on their commercial relations, reflecting Beijing's growing economic assertiveness.
Speaking at the opening of the Strategic Economic Dialogue, Vice Premier Wang Qishan appealed on Thursday to Treasury Secretary Henry Paulson and other US officials to take steps to calm the global financial crisis and protect Beijing's US investments. China's central bank governor said US financial excesses were to blame for the crisis.
"The important reasons for the US financial crisis include excessive consumption and high leverage," said Gov. Zhou Xiaochuan, according to Jin Qi, a central bank official who briefed reporters. "The United States should speed up domestic adjustment, raise its savings rate and reduce its trade and fiscal deficits." The unusually pointed Chinese comments reflected the close links between the world's biggest and fourth-biggest economies and the global significance of their ability to maintain steady trade relations.
Paulson said engagement between China and the United States has helped in managing the crisis. Officials said both sides stressed the importance of cooperation to combat a potential rise in trade protectionism.
The two-day meeting, due to wrap up on Friday, was not expected to produce breakthroughs on trade or other sensitive issues. The two sides signed a pact on Thursday to cooperate in financing for projects to improve energy efficiency.
Speaking earlier as Paulson listened, Wang appealed to Washington to "take the necessary measures to stabilize the economy and financial markets, as well as to guarantee the safety of China's assets and investments in the United States."
Wang did not elaborate, but Beijing owns $585 billion in Treasury debt that has helped to finance US budget deficits and its holdings of other US assets are growing. But the weak dollar and financial turmoil have fueled Chinese anxiety about such investments.
Wang also said Beijing wants to see progress in reforms of international financial institutions _ a reference to its desire for a bigger role in the International Monetary Fund and other bodies. US officials said China promised more currency reforms. Washington and other trading partners say China's yuan is kept undervalued, giving its exporters an unfair price advantage and adding to its trade surplus. Some American lawmakers are calling for punitive action against Beijing.
"The Chinese continued to reinforce to us that they were committed to continued reform, and by that I mean continued appreciation (of the yuan) over time," said an American official who briefed reporters on condition he not be identified further. The yuan has risen 20 per cent against the dollar since Beijing cut its peg to the dollar in July 2005. But it has fallen this week in government-controlled trading _ including a nearly 1 per cent decline on Monday, its biggest one-day drop in three years _ in what analysts suggested was a message from Beijing to go easy on the issue.
The yuan's drop on Monday also might have been meant as a warning to President-elect Barack Obama, that talks will be more effective than confrontation, said Frank F.X. Gong, chief Asia economist for JP.