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Striking a balance in US-China ‘Strategic Economic Dialogue’

Updated On: Dec 15, 2006

A high-level US delegation led by Treasury Secretary Henry Paulson is in the Chinese capital Beijing for an inaugural semi-annual Strategic Economic Dialogue with Vice-Premier Wu Yi this week, signifying the growing relationship between the US and Chinese economies.

Mr. Paulson is accompanied by his fellow Cabinet secretaries of commerce, labour, energy, health and human services, and Mr. Bernanke, chairman of the US Federal Reserve Bank to discuss a broad range of issues aimed to cool the economic tensions of a growing trade gap.

The issues expected to be discussed include bilateral trade imbalance, the renminbi exchange rate, increased opening-up of China’s financial sector to foreign competition, intellectual property rights protection as well as restrictions on high-tech US exports to China. In the opening address, Mr. Paulson called on China to make full use of policy tools, including monetary policy in order to achieve balanced growth.

Besides the trade issues, interrelated issues such as energy, environmental pollution and improvement of health care will be brought to the table. “Through this strategic economic dialogue, we can work with China’s leaders to help it achieve more environmentally sound growth and constructive engagement with the global energy market,” said Paulson.

Apart from the two-day meeting, the US officials will also have an audience with President Hu Jintao and meet with Premier Wen Jiabao showing the seriousness of the two countries in reshaping bilateral relations and acknowledging that the relationship is vital to both countries’ future prosperity. “Our outlook toward China, the way we manage the relationship, has to be a long-term one. There is a tendency is Washington to want to get immediate answers, but a relationship this important will have consequences for our economy and for our nation over many generations…the work that we do this week and in future meetings should all be with an eye toward building a cooperative relationship for many years,” said Paulson.

According to an analyst Mr. Ruan, Beijing and Washington are exploring new approaches to their disputes and the goal of the dialogue is ambitious, seeking changes across a spectrum of issues from monetary policy to energy and social services.

With China under pressure to prevent the deterioration of relations that would result from a failure of the dialogue coupled with the mounting political pressure in the US and the political clout that Paulson carries back home, China has offered a package of business deals and has announced its anti-piracy crackdown.

The “business package” includes the signing of deals worth hundreds of millions with four of American blue-chip companies – Home Depot, GE Aviation, Oshkosh Truck and VeriSign – to sell their products in China in order to boost American exports.

The anti-piracy campaign announced yesterday will target producers and distributors of illegally copied movies, music and other goods with severe punishment for smugglers, according to Xinhua News Agency.  As another “goodwill gesture”, China yesterday (14 Dec) also allowed the yuan to rise slightly to 7.8185 to a dollar.

As much as there are tangible progress in the economic relations between the two countries and the pragmatism that is brought to the dialogue, many are not expecting immediate miracles. According to the director of the Institute of World Economics and Politics at the Chinese Academy of Social Sciences in Beijing, Yu Yongding, “The visit by Mr. Paulson will have some influence on Chinese political leaders, but China always prefer gradualism.” And this was amply shown in the opening speech of Premier Wu Yi in which she painted a stark picture of China’s arduous task of governing a country of 1.3 billion people, and indirectly appealed to more understanding from the US in order to address the various prickly issues sensibly without causing any major disruptions to the “healthy development of Sino-American relations”.

Sources:

Beijing offers US pre-talks sweetener package (Straits Times, 14 December 2006)

US, China to kick off ‘strategic dialogue’ (Straits Times, 13 December 2006)

Bush’s big guns on Beijing visit (People’s Daily Online, 13 December 2006)

Paulson calls for more flexible yuan as summit opens (Bloomberg, 14 December 2006)

Need for balance in US-China talks (Gulf News, 13 December 2006)

China announces new anti-piracy crackdown ahead of Paulson visit (The Star, 13 December 2006)

US seeks to lower expectations for economic talks with Chinese (International Herald Tribune, 13 December 2006)

US sends the A team for key Beijing talks (China Daily, 14 December 2006)

China must make full use of policy tools – Paulson (Reuters, 14 December 2006)

China allows yuan to rise as “goodwill gesture” to US (Straits Times, 15 December 2006)

Misunderstanding hurting mutual ties: Vice-Premier Wu (Straits Times, 15 December 2006)