U.S. Encourages Economic Reform in China
By Merle David Kellerhals Jr.
Staff Writer
Washington - The state visit of Chinese President Hu Jintao to the United States January 19 comes during a significant transition for the global economy, China's economy and the United States, says Treasury Secretary Timothy Geithner.
"The global economy is emerging from the financial crisis, but that crisis has left lasting scars that will take years to repair," Geithner said in a January 12 speech ( http://www.america.gov/st/texttrans-english/2011/January/20110112113449su0.3713299.html ) at Johns Hopkins University's School of Advanced International Studies in Washington.
"It has left a growing gap between the growth trajectories of the large developed economies and the rapidly growing emerging economies," he said.
When President Obama and Hu meet at the White House, confronting these sweeping economic issues will be a significant part of their agenda, Geithner said. The stakes are high, and the changes that are necessary create both opportunities and challenges.
Geithner said that while many of the major economies are still rebuilding after the crisis, many of the emerging economies, like China's, are at the beginning of what should be a long period of rapid economic growth that includes rising incomes, which creates demand for resources and for investment capital.
The United States can expect its economy to continue growing, but at about half the rate of the major emerging economies, and about twice the rate of Europe and Japan, he said.
"These dynamics will fundamentally change the balance in the world economy, forcing changes in the architecture of the trade and financial systems," Geithner said. "In this new global context, China's principal economic challenge is how it will manage the next stage in its transition from a state-dominated developing economy, dependent on external demand and technology, to a more market-oriented economy, with growth powered by domestic demand and innovation."
While the United States and China compete in many areas, Geithner said, together their economic strengths tend to complement each other. As China faces these challenges, as it transitions to a more market-oriented economy, it is in the U.S. interest for the Chinese to manage these challenges successfully, he said.
In this relationship with China - from its currency exchange rate to protecting intellectual property - U.S. priorities reflect changes that will benefit China, Geithner said.
China's growth has been made possible by the access it has enjoyed to the world financial markets, and the investments and technology of the United States and other major economies, Geithner said. China has also benefited from the open, multilateral system of trade and investment built decades before it opened its economy to the world.
"The benefits of this relationship are hard to capture in any one statistic, but remember this: The United States is on track to export more than $100 billion of goods and services to China this year," Geithner said. "Our exports to China are growing at twice the rate of our exports to the rest of the world."
Geithner said the United States has two objectives in this economic relationship with China.
The first is to expand export opportunities for U.S. businesses to sell to the Chinese market, and that requires a trading system that is equally fair to U.S. companies and to Chinese companies in China, in the United States and globally, he said.
The second objective is to promote reforms that will reduce China's reliance on exports and that encourage a shift to domestic consumption and investment. "As part of this, China's exchange rate needs to strengthen in response to market forces," Geithner said.
"Importantly, China still closely manages the level of its exchange rate and restricts the ability of capital to move in and out of the country," Geithner said. "This is not a tenable policy for China or for the world economy."
(This is a product of the Bureau of International Information Programs, U.S. Department of State.)
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