U.S. researcher sees great chances to improve U.S.-China relations

11:30, December 26, 2010      

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The coming year offers a great chance for the United States and China to improve their relations, a senior U.S. researcher said.

"I think there are a number of reasons for hope," Philip I. Levy of the American Enterprise Institute told Xinhua in a recent interview.

It is in the interests of the two countries to join hands in promoting a strong, sustainable and balanced growth of the two economies and the world economy as a whole, Levy said.

China faces the question of "how to stimulate domestic consumption as a source of demand," while the United States needs to take "a serious move to rein in budget deficits, largely through spending reduction, and to spur public and private saving," Levy continued.

"The Obama administration has been fairly sensible in its approach to China, with a few bows to domestic political imperatives (e.g., the tire tariffs last year)," he said. "Some of the more alarming turns came from Congressional pressure."

But Levy said the new Republican leadership in the House has indicated that China currency bills will not be a high priority for them.

Levy noted the big difference in China's and the U.S. dealing of the international financial crisis.

In terms of performance, he said, China has maintained a substantially higher growth rate and now faces inflation concerns, while the United States went through a sharp recession and now has to address deflation concerns.

"In terms of their approaches to the global economic downturn, each argued that it made effective use of fiscal stimulus. But the approaches were very different and the verdicts on effectiveness are not yet in," he said.

He explained that the U.S. fiscal stimulus was a mix of money distributed to states, and money distributed through tax disbursements and new spending programs, while China, in contrast, pushed to dramatically expand bank lending.

When asked about the potential changes in China's economic relations with the world economy in the next five years, Levy said:

"I expect there will be significant changes in China's economic relations with the world economy in the next five years. China will have to reorient itself from the world's low-cost producer to a producer of higher value-added goods.

Source: Xinhua
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