- The Washington Times - Sunday, October 16, 2005

XIANGHE, China (AP) — Top U.S. economic officials, led by Treasury Secretary John W. Snow and Federal Reserve Chairman Alan Greenspan, began talks with their Chinese counterparts yesterday on rancorous economic issues, including Beijing’s currency controls and its huge and growing trade surplus.

The talks followed a meeting of financial leaders of the world’s leading economies that focused on coping with high oil prices and other risks to global growth.

U.S. officials said they would press Beijing to move faster on easing controls on the yuan, which critics say is undervalued by as much as 40 percent, pushing exports higher and contributing to a bilateral trade imbalance that topped $162 billion last year.

But officials said they also wanted to include a wider range of reforms to China’s economy, lobbying Beijing to open its financial and other markets to foreign firms, encourage more domestic demand and reduce its dependence on exports.

“If we truly want to deal with these imbalances bilaterally or multilaterally, you need to focus on more than just the currency,” said Tim Adams, the U.S. Treasury Department’s undersecretary for international affairs.

U.S. officials hope that by putting more emphasis on China’s financial reforms, they can call attention to the progress Beijing has made, while also encouraging it to open wider to foreign competition.

Specifically, the United States is calling for established foreign banks, insurance and securities firms to be eligible to set up multiple branches in China on the same terms that domestic firms do.

Washington also wants China to remove the $10 billion minimum requirement in assets that restricts the ability of foreign institutional investors to buy domestic securities, and to end foreign-ownership caps on financial institutions and allow 100 percent foreign ownership of subsidiaries.

“To the extent that China succeeds in building its capital markets, it will increase the size of the Chinese economy and the world economy as well,” said Christopher Cox, chairman of the U.S. Securities and Exchange Commission.

Mr. Cox, a former Republican congressman from California, said he would seek closer cooperation with China’s financial regulators, including initiatives to help train Chinese stock regulators and to work together on investigations into market abuses.

But U.S. officials said they do not plan to ease pressure on China to allow more currency flexibility.

Chinese officials say they cannot move any faster on currency reforms after having revalued the yuan by 2.1 percent in July and giving up a decade-old peg to the U.S. dollar, switching to a basket of currencies that also includes the Japanese yen and euro. The currency has gained only about 0.3 percent in value since then.

Participants said yesterday that the currency issue was not raised during the Group of 20 talks, which included finance ministers and central banks from the richest industrialized countries, as well as big developing nations such as China, India and Brazil.

But a joint statement issued after the talks included a pledge by all members to “implement necessary fiscal, monetary and exchange-rate policies,” dismantle trade barriers and resolve imbalances viewed as threats to global economic growth.

This is the 17th meeting of the U.S.-China Joint Economic Commission since the forum was founded in 1979 to thrash out economic issues. The meeting is scheduled to end today.

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