XIANGHE, China — With rising inflation and a potentially overheated economy, China should quicken the rise of its currency to maintain economic stability, U.S. Treasury Secretary Henry Paulson Jr. told Chinese officials on Wednesday.
"China's leaders have voiced concerns about China's macroeconomic stability, in particular mounting inflation, growing asset bubbles and possible overheating," Paulson said. "A more flexible exchange rate policy is especially important to China now, given these risks."
The Chinese yuan has appreciated in value by 9.9 percent since the central bank ended its strict peg to the dollar in 2005 in favor of using a basket of currencies. Still, U.S. officials maintain the yuan is greatly undervalued, giving China, with low production costs, an unfair trade advantage. China repeatedly has said it will revalue the yuan on its own timetable, without disrupting its economic structure.
"The pace of [yuan] appreciation remains one of the key levers to deal with China's external and internal imbalances," Paulson said.
The Treasury secretary spoke at the opening of top-level meetings at a resort conference center here, east of Beijing, that are part of the Sino-U.S. "strategic economic dialogue." The two days of talks include several U.S. Cabinet officials and their Chinese counterparts discussing issues from food and product safety to currency and the environment. Officials stressed that these are not negotiations, but the meetings are intended to curb trade tensions and to reach new agreements in several areas.
Paulson's remarks about the yuan came a day after the Chinese government released statistics showing another record month of rising inflation. The consumer price index jumped 6.9 percent in November compared with the same month last year, marking an 11-year high and underlining the country's worries about increasing prices. The pace is far above the 3 percent maximum the government believes China can bear without threats to its social stability, and the highest price increases are coming in tense rural areas.
The same report showed a soaring trade surplus for China that reached $26.3 billion in November, the third-highest monthly level on record. The surplus continues to grow despite some increases in China's imports, according to the National Bureau of Statistics.
Paulson's counterpart at the meetings, Chinese Vice Premier Wu Yi, said there is a "shared desire to resolve difficulties and problems that have occurred in the course of rapid growth of bilateral business ties."
Wu did not address China's inflation or the pressure to allow the currency to appreciate, but instead warned against trade sanctions by the U.S. against China. She said there are about 50 "protectionist China-related bills" before Congress.
"Obviously, to resort to trade protectionism and blame another country for the structural problems in the U.S. economy is the wrong approach, which would only harm the interests of the United States itself," Wu said.
"Trade protectionism will harm the interests of both sides," Finance Minister Xie Xuren told reporters.
As the U.S. considers legislation, officials said China is showing some reluctance in opening its markets to international competition. And Paulson said there is a growing sentiment in the U.S. and China toward trade protectionism.
"We must resist attempts to reduce transparency or increase regulatory obstacles in order to protect domestic industries," he said. "Taking short-term, politically expedient actions will almost certainly impede our long-term prosperity and ability to address long-term strategic issues."
Wu promised that China will "greatly expand its domestic consumption," opening new markets to U.S.-made goods and services. She said the central government plans to make this an energy-efficient and environmentally sound country with a solid economic base.
At separate trade talks under the U.S.-China Joint Commission on Commerce & Trade, the two countries this week signed 14 new agreements involving a range of issues, including food and product safety. The pacts establish measurable guidelines and deadlines for improving safety checks of products exported to the U.S. from China. Exports will be required to register with Chinese authorities, who will then provide more detailed information to customs officials in the U.S. Mass product recalls and safety concerns have made the safety of goods manufactured in China a top concern this holiday season for American consumers. Paulson said the issue is vitally important to bilateral trade.
The earlier discussions sounded a somewhat acrimonious note about product safety, Wu told reporters. She said the meetings were delayed by a heated discussion. Later, Wu said the two sides could work together to overcome their differences.Other agreements include a provision for more Chinese tourist visas from the U.S. and promises from China to open more of its markets, including telecommunications and agriculture, to U.S. goods and services. The economic dialogue concludes today.
“I think what’s so interesting about the #MeToo movement and this whole new wave of feminism in general, is that women are finally seeing, ’Oh I can start my own company, oh I can lear to code, oh I can leave my nine-to-five job and do the thing I want to do,” said @brooklyndecker ahead of her @sxsw talk for @createcultivate. The former model took the stage to share wisdom about networking and female-driven entrepreneurship. #wwdeye #sxsw (📷: @jgreenery)
“I was making the guacamole when my scout saw me,” says model @stuckinteenage on being discovered just six months ago while working at @chipotlemexicangrill. Since then Williams has signed with @dnamodels, walked in her first show at @calvinklein and landed on the cover of @vogueitalia – a high point of any model’s career. To read @lisajlockwood’s full interview with the model on her experiences thus far, head to WWD.com – link in bio. (📷: George Chinsee)
“I love the idea of dialogue, period. It’s where I’ve always gotten my inspiration from: hearing other women speak, their journeys and their paths,” said @hereisgina, who delivered the keynote speech at the @sxsw conference for @createcultivate, the online platform and conference series for women. For her two panels, Rodriguez chose female empowering, female-led and female entrepreneurs to focus on. Head to WWD.com to read more about her thoughts on Time’s Up, growing up in a family of women and why we “need a girls’ club.” #wwdeye #sxsw (📷: @jgreenery)
Leading luxury brand are shaking things up to keep up with streetwear. Case in point: the arrival of @mrkimjones as artistic director of @diorhomme. Jones, who succeeds @Kris_Van_Assche, is seen as one of the handful of designers who can actually straddle the luxury and streetwear worlds — which could lead to even more changes at established brands. What could this mean for the rest of the menswear landscape? Head to WWD.com to find out what experts predict #wwdfashion (📷: @franckmura)
“It’s like buying groceries. You’re going to buy the best mango, the best mozzarella, the best things. You have to, or others are going to take it all,” said @gabrielahearst on why she uses only the finest fabrics. Last week, Hearst received her first @cfda nomination for Womenswear Designer of the Year, and earlier this month she opened a permanent showroom in Paris. To read @jessiredale’s interview with the designer and find out why this is shaping up to be a big year for her, head to WWD.com. #wwdfashion (📷: @francoisgoize)
“It’s an interesting thing, playing a younger version of your mother. It’s an interesting concept. I adore my mom and love her in every capacity, but it was just something that had never crossed my mind,” says @anniemstarke on playing a young Joan Castleman in “The Wife.” The same role will be played by her mother Glenn Close. Read more about her growing up in the film industry as the daughter of producer John H. Starke and Close and what she has planned for the future #wwdeye (📷: @nataliamantini)
@asics is launching a new streetwear sneaker inspired by its latest ambassador, @steveaoki. The Hyper-Kenzen x Aoki, which will launch at @footlocker stores exclusively tomorrow, is a slip-on style that incorporates the brand’s proprietary Gel technology through beads integrated into the midsole for comfort and endurance. Read the full story on WWD.com.