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China, US promise $20 billion for trade
By JOE McDONALD,AP Business Writer AP - Saturday, December 6
BEIJING - 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.
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