- The Washington Times - Monday, October 17, 2005

BEIJING (AP) — Two days of U.S.-Chinese trade talks ended yesterday with no response to an ambitious American proposal to reform China’s financial sector and open its markets wider to foreign products, while also moving faster on currency reforms.

The two sides issued a joint statement highlighting their agreement to cooperate in reforming and regulating financial markets and on the need for currency stability. As is typical in such documents, the emphasis was on consensus.

The statement noted that China intended to make its tightly controlled currency policies more flexible. But it added: “Both sides reaffirmed that excess volatility and disorderly movements in exchange rates are undesirable for economic growth.”

In a meeting with U.S. Treasury Secretary John W. Snow, Chinese Prime Minister Wen Jiabao summed up ties as “generally good,” saying any issue can be settled through talks “while shelving trivial differences,” the official Xinhua News Agency reported.

There was no clear indication of how the Chinese had received the U.S. proposals. China has rejected pressure to waver from its style of communist-led economic reforms. But Mr. Snow emphasized benefits to China and its economy from building up its financial systems and allowing freer trade.

“Underscoring everything we’re doing is a recognition that everything we’re doing is a positive sum game,” Mr. Snow told reporters. “China’s success helps the global economy; our success helps the global economy.”

By moving beyond the currency issue to a wider set of priorities, the administration of President Bush can point to progress elsewhere while avoiding confrontation with Beijing in an area where it says it cannot move any quicker.

Mr. Snow and the others said they were encouraged by the descriptions by Beijing’s central bank governor, finance minister and other leaders of moves to make currency policy more flexible, privatize state-owned companies and improve scandal-laden, developing financial markets.

China’s ruling Communist Party recently signed off on a five-year plan focused on pushing ahead with financial reforms while seeking to reduce the huge divide between the city dwellers who have benefited most from the country’s economic boom and the hundreds of millions of rural workers who are far behind.

Mr. Snow applauded those objectives but urged the leadership to do more to build up social welfare services and financial institutions that would offer broader, safer investment options, giving Chinese alternatives to stashing money in bank accounts while encouraging more consumer spending.

“As China moves toward a more consumer-based society, the savings rate will go down and consumers will spend more, allowing China to buy more from the United States,” he said.

Mr. Snow said he needed to see more progress toward loosening controls on the Chinese currency, the yuan, to head off complaints in Washington over the Chinese trade surplus, which surged to a record $162 billion last year.

Chinese officials have said that, for the sake of stability, they will let the yuan’s value adjust gradually after a 2.1 percent revaluation in July, when Beijing gave up a decade-old peg to the dollar and began linking the yuan to a basket of currencies that includes the yen and the euro.

Congress has reacted to the gap with calls for more forceful action, with some lawmakers backing legislation that would impose 27.5 percent tariffs on all Chinese imports unless Beijing takes more steps to allow its currency to rise against the dollar.

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