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Help balance world economy, America urges China

BEIJING: United States Treasury Secretary Timothy Geithner on Monday called for America-China co-operation in tackling the economic crisis and helping rebalance the world economy, even as he said the global recession was “losing force.”

Mr. Geithner also called on China to move towards a “more flexible” exchange rate regime to address the growing trade imbalance between the two countries, which reached an all-time high of $266 billion at the end of last year.

On a three-day visit to Beijing, his first since he took office in January, Mr. Geithner’s tone has largely been conciliatory — far removed from his earlier strong position on China’s exchange rate policies. Mr. Geithner had in January accused China of “manipulating” its currency to sustain its exports, angering officials in the Chinese government.

The current economic crisis has in some respects changed the relationship between the two countries, with a considerable softening in the American position on China’s currency policies. On Monday, in a speech at Peking University, Mr. Geithner struck a conciliatory tone, outlining the common challenges the two countries faced and stressing the need to work together to rebalance the world’s economy.

Doing so, he said, would require China to better stimulate domestic demand and rely less on its exports for growth, though the country was in an “enviably strong position.” The U.S. on its part would “create a more stable and more resilient financial system” and “strengthen and redesign regulation”.

While Mr. Geithner stopped well short of accusing China of currency manipulation, he did urge the Chinese government to continue its “progress toward a more flexible exchange rate regime...[which] will help reinforce the shift in the composition of growth… and provide greater ability for monetary policy to achieve sustained growth with low inflation in the future”.

Mr. Geithner has also used this visit to reassure Chinese officials that the U.S. was moving quickly to handle its increasing budget deficit — expected to reach $1.8 trillion this year — and, just as any bank would seek to calm its biggest creditor, has repeatedly stressed that China’s assets are in safe hands.

Economists in China have grown increasingly critical of the Chinese government’s policy of buying U.S. treasury bills. As of March, China owned an estimated $768 billion of American treasury securities.

In recent months, Beijing has become more outspoken about its concerns regarding the U.S. economy. Zhao Xiaochuan, Governor of the Chinese central bank, recently called for a new reserve currency to replace the dollar while in March, Premier Wen Jiabao said China was “concerned” about the safety of its U.S. assets. Mr. Geithner will have the chance to allay these concerns on Tuesday, when he meets Mr. Wen and President Hu Jintao.

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