BEIJING — China and the U.S. must work together to fight the global financial crisis, despite the two countries facing markedly different challenges, U.S. Treasury Secretary Timothy Geithner said here Monday.
This story first appeared in the June 2, 2009 issue of WWD. Subscribe Today.
Geithner, who sparked China’s ire during his confirmation hearing by saying the government manipulated its currency only to back off that charge in an April Treasury report, struck a conciliatory tone on his first official visit here, telling a crowd at Beijing University that the U.S. and China have mutual long-term economic interests.
“In the face of this challenge, China and the United States are working together to help shape a strong global strategy to contain the crisis and to lay the foundation for recovery,” Geithner said. “And these efforts, the combined effect of forceful policy actions here in China, in the United States and in other major economies, have helped slow the pace of deterioration in growth, repair the financial system and improve confidence.”
Geithner, who pointed out he studied Mandarin in Beijing nearly 30 years ago, nudged China again on the currency issue, calling for stronger reforms to allow appreciation of the yuan. Since the global financial crisis set in, the yuan has remained flat and the Obama administration has picked up the mantra of its predecessors by calling it undervalued. Critics, including leading economists and American manufacturers, say the artificially low value of the currency gives China an unfair trade advantage.
In the vein of his predecessor, former Treasury Secretary Henry Paulson, Geithner portrayed exchange-rate reform as a measure to benefit China as it moves away from heavy reliance on manufacturing industries. China’s central government is working to replace millions of factory jobs lost to the crisis and domestic increases in labor.
“An important part of this strategy is the government’s commitment to continue progress toward a more flexible exchange rate regime,” said Geithner. “Greater exchange rate flexibility will help reinforce the shift in the composition of growth, encourage resource shifts to support domestic demand and provide greater ability for monetary policy to achieve sustained growth with low inflation in the future.”
The secretary also called on China to continue opening its markets to international competition, a move that would further stimulate domestic consumption that’s key to China’s plans to keep its economy growing at a stable rate.
Local analysts said there were many issues at play and Geithner’s visit is likely to help build a foundation for stronger ongoing U.S.-China relations. Central Chinese leaders will next visit the U.S. for another round of talks ahead of the next session of the U.S.-China Strategic Economic Dialogue, the first under the Obama administration.
Tao Wenzhou, a senior research fellow at the Chinese Academy of Social Science, said the two countries can learn from one another as they work their way out of individual problems created by the crisis.
“America has an unreasonable economic structure, with the savings rate too low,” Tao said. “China’s structure is also unhealthy, but with the opposite problem. They will exchange their opinions about steps to reform these issues. The meetings are mainly about cooperation.”
In his speech, Geithner noted that while China’s economy is doing better than most major world economies, this country still needs to combat the crisis. China’s manufacturing has sunk significantly on lower demand from American and European buyers, and the country has opened a two-year, $586 billion stimulus spending package.
“China, despite your own manifest challenges as a developing country, you are in an enviably strong position,” Geithner said. “But in most economies, the recession is still powerful and dangerous. Business and households in the United States, as in many countries, are still experiencing the most challenging economic and financial pressures in decades.”
Geithner is scheduled to leave Beijing today after several meetings with top Chinese government counterparts.