China, U.S promise $20 billion for trade
The Associated Press - Dec 5, 2008
BEIJING (AP) — The United States and China promised Friday to jointly tackle
the global financial crisis and pledged $20 billion to finance trade as they
wrapped up high-level talks marked by a pointed Chinese appeal to Washington to
stabilize its economy.
"We are both committed to strengthening the global economy," Treasury Secretary
Henry Paulson, the U.S. envoy to the Strategic Economic Dialogue, told
reporters, standing with his Chinese counterpart, Vice Premier Wang Qishan..
The two countries' export-import banks will provide the credit to importers in
developing economies to buy U.S. and Chinese goods, Paulson said. He said that
would help economies where traders have seen credit dry up as global turmoil
spread.
"The most pressing task at hand is to quickly take effective measures to
contain and curb the spread of the financial contagion and avoid a global
recession," Wang said.
Also Friday, China promised to ease restrictions on foreign banks by allowing
their local subsidiaries to trade bonds on the same terms as Chinese
institutions. Washington agreed to speed up approval of licenses for Chinese
banks to operate in the United States. The two sides promised to cooperate more
closely in regulating financial risks.
On Thursday, Wang urged Washington to stabilize its economy, while China's
central bank governor said U.S. financial excesses were to blame for the
crisis. Their comments reflected China's growing assertiveness and a role
reversal after usually being on the receiving end of calls from the U.S. for
currency and financial reforms.
U.S. officials said Beijing promised to continue reforms that have let its yuan
rise against the dollar. Washington and other trading partners say the yuan is
kept undervalued, giving China's exporters an unfair price advantage and adding
to its trade surplus.
Paulson declined to say whether the dialogue might continue after
President-elect Barack Obama takes office in January. But he said both sides
regarded it as a great success.
"I think the Chinese view this as something that works — doesn't matter what
you call it," Paulson told reporters.
Obama has yet to say whether he will continue the dialogue, which was begun in
2006 to address trade issues and mollify American lawmakers who want to punish
Beijing over trade and currency disputes. Some analysts say the new president
and the Democrat-dominated U.S. Congress might take a harder line on China.
The chairman of the U.S. Senate Finance Committee, Max Baucus, appealed in a
statement for Obama to continue the dialogue process.
"At this time of unpredictability in our world, high-level engagement with
China must be a constant," said Baucus, a Democrat from Montana.
U.S. and Chinese officials also agreed to cooperate to combat a possible rise
in political pressure for trade protectionism as economic conditions worsen.
Paulson said some in China will blame hard times facing its exporters on
Beijing's decision to let the yuan rise against the dollar.
"I think the Chinese recognize, as we do, how important currency reform will be
to rebalancing growth," Paulson said, referring to Beijing's effort to reduce
reliance on exports.
China also said it would allow the local arms of foreign banks to increase the
money they have available for lending by temporarily permitting them to receive
loans from affiliates abroad. The move might be intended to boost foreign
lending to help finance a multibillion-dollar Chinese economic stimulus package
announced last month. China has lifted lending limits on its own banks and
sharply cut interest rates in an attempt to spur borrowing by companies and
consumers.
Wang's comments Thursday reflected Chinese unease about the stability of the
U.S. economy, which is both a major market for its exports and a key
destination for Chinese investment.
Beijing owns $585 billion in Treasury debt that has helped to finance the U..S.
budget deficit and its other U.S. investments are growing. The weak dollar and
financial turmoil have fueled Chinese concerns about the safety of such
holdings.
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.
The yuan has risen 20 percent 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 percent decline Monday, its biggest one-day drop
in three years — in what analysts suggested was a message from Beijing to go
easy on the issue.
China's economic growth is expected to slow this year to about 9 percent, down
from last year's 11.9 percent. Communist leaders worry about rising job losses
and possible unrest.
Beijing is launching a 4 trillion yuan ($586 billion) stimulus package meant to
revive slowing growth through heavy spending on construction and other
projects.
Associated Press Writers Christopher Bodeen and Henry Sanderson contributed to
this report.
