U.S. President Barrack Obama sent his top administration officials Monday to a crucial meeting with emerging economic powerhouse China, claiming bilateral relations between the two are "important". The administration also tried to reassure Beijing that the U.S. will not let its huge budget debt or runaway inflation, if any, jeopardize the value of massive Chinese investments in the Treasury bonds.
The focus of the high-level consultations between two of the world's largest economies are measures to arrest the global economic downturn and how to cope with the nuclear issue of the Democratic People's Republic of Korea, or North Korea.
Present at the first of a two-day conference were Treasury Secretary Timothy Geithner, Federal Reserve Chairman Ben Bernanke, National Economic Council Director Lawrence Summers and Peter Orszag, Obama's budget director.
U.S. officials told reporters that the U.S. side stressed to the Chinese that the United States has a plan to bring the deficit down once the economic crisis has been resolved. Officials said Bernanke discussed the Fed's exit strategy from the current period of extraordinary monetary easing.
“The United States and China share mutual interests," Obama declared at the opening ceremony for the two days of talks, which will be led by both the secretary of state, Hillary Clinton, and the Treasury secretary, Timothy Geithner.
“If we advance those interests through cooperation," Obama said, “our people will be better off — because our ability to partner with each other is a prerequisite for progress on many of the most pressing global challenges."
Obama said the two countries would discuss how to work together on economic policy, climate change, clean energy technology, nuclear nonproliferation, cracking down on terrorism and other threats, and tackling humanitarian crises worldwide.
"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. He declared a new era of "cooperation, not confrontation" between the two nations.
"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.
On the Chinese side, Assistant Finance Minister Zhu Guangyao told reporters that Beijing and Washington had "profound exchanges" on the issue of the U.S. economy.
The Chinese, who have the largest foreign holdings of U.S. Treasury debt at $801.5 billion, have been expressing worries that soaring deficits could spark inflation or a sudden drop in the value of the dollar, thus jeopardizing their investments.
"We sincerely hope the U.S. fiscal deficit will be reduced, year after year," Zhu, speaking through an interpreter, told reporters after the first day of talks had included. "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 discussions in Washington represent the continuation of talks begun by the Bush administration. While the initial talks focused on economic tensions, Obama expanded the agenda to include foreign policy issues such as America's drive to get China's support for more international pressure to curb Pyongyang's nuclear ambitions.
The Chinese delegation was led by Chinese Vice Premier Wang Qishan and State Councilor Dai Bingguo.
David Loevinger, Treasury's senior coordinator for China affairs, said that Orszag and Summers both stressed the commitment of the administration to attacking the U.S. deficits. He said that Bernanke provided details of the Fed's strategy for unwinding the low interest rates it has engineered and the sizable amount of fiscal stimulus in a way that does not generate unwanted inflation in the United States.
"There were serious questions about what the economic outlook is and ... our plans for withdrawing stimulus," Loevinger told reporters at a briefing by U.S. officials on the first day of talks.
In their public comments Monday, 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 8 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.
"At present, the world economy is at a critical moment of moving out of crisis and toward recovery," Wang said, speaking through a translator.
He said Americans were already moving to boost their personal savings rates. Economists have long argued that is necessary to controlling U.S. 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 U.S. 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.
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. By People's Daily Online