BEIJING — While American officials called meetings with their Chinese counterparts this week some of the most productive in years, the two sides failed to reach agreements on contentious issues ranging from territorial disputes to human rights and what the U.S. calls unfair export practices.
“We didn’t agree on everything,” Secretary of State John Kerry said at a press briefing here on Tuesday night, which wrapped up the annual two-day U.S.-China Strategic and Economic Summit. “But there was no question there was far more agreement than disagreement. I found it to be an extremely constructive two days.”
The talks, mostly held at a state guesthouse in the Chinese capital, were the last to take place under the Obama administration. They were also notable due to the presence of Chinese President Xi Jinping, who made appearances on both days in addition to a lengthy meeting on Tuesday afternoon with Kerry and Treasury Secretary Jacob J. Lew.
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Xi called China’s relationship with the U.S. “multifaceted” and “highly complicated.”
Tension had been mounting prior to the talks with China lashing back at Washington over its accusations it had been distorting global markets with cheap exports, particularly steel. The two sides failed to reach an agreement over the contentious issue of the South China Sea where the Chinese have laid claimed to territories also claimed by Southeast Asian countries, including the Philippines and Vietnam. China has also been building islands with military facilities in the area.
Also speaking to reporters Tuesday night, Lew said there had been positive discussions on the issue of excess capacity in China’s heavy industry sector. The Treasury secretary said China has been flooding global markets with cheap steel, aluminum and other products, causing huge distortions and creating unfair competition.
With steel, Lew said China had made a “clear commitment to action.”
“I think we understand each others’ positions quite well,” Lew said. “We were not able to reach a similar conclusion on aluminum. We will continue those discussions and press forward. These are international issues — they aren’t just U.S. concerns. If we don’t see progress, we will raise the issue again.”
The U.S. and China have a small window between now and the G20 meeting in September to cement a bilateral investment treaty or risk never reaching an agreement, Lew said. Next week, Chinese officials will submit a list of sectors where U.S. investment is off-limits. The Treasury secretary said he did not want to “pre-judge” the list but said Washington expects an “ambitious response” and “real movement.”
China’s management of its currency, the yuan, was also a central concern. Lew said his counterparts vowed to continue market-oriented exchange rate reform while stressing there is “no basis for a sustained depreciation of the yuan.”
As China’s economic growth has slowed in recent months, the country’s currency has substantially depreciated against the dollar, which some economists have called a move to help bolster exports for a weakening manufacturing sector, plagued with rising labor and material costs as well as lackluster global demand.
“China reaffirmed its G20 commitments to avoid competitive devaluation and not target the exchange rate for competitive purposes,” Lew said, adding that such commitments would “bolster market confidence and support financial market stability at a time when concerns about the global economy are on the rise.”
China agreed to allow U.S. banks to clear transactions denominated in Chinese currency for the first time. It also agreed to take specific steps to further open its financial sector to U.S. companies as part of an effort to promote greater transparency and accountability — other key themes of the talks, with the U.S. calling for the Chinese to take greater steps to make economic practices ranging from the use of government subsidies to government policies less opaque.
Such reforms will “help U.S. investors to participate in China’s financial markets and contribute to global financial stability,” Lew said. “It is clear from our discussions that China’s leaders recognize the need to reform China’s economy and its growth model.
“Given that China is one of the world’s two largest economies and the largest trading nation, this will also promote better understanding of global economic developments.”
Kerry and Lew pressed Chinese officials to increase intellectual property protections for American companies as well as questioned their counterparts on what they say are growing complaints from U.S. firms on the climate towards multinationals operating in the country.
“We have to work on intellectual property. We have to work on transparency and accountability,” Kerry said during a roundtable discussion with chief executive officers on Tuesday. “We have to work on the certainty of the rules of the road.”
Kerry said the two sides made additional progress in the areas of climate change and the push to denuclearize North Korea. On Tuesday night, he said he also addressed a recently passed law aimed at foreign non-governmental organizations operating in China. The Obama administration has been critical of the law, which could greatly restrict non-Chinese NGOs’ work.
“What I heard directly from President Xi actually was that China intends to remain open — to open up even more than it is today — and that it does not think that these laws will effect the ability to do business and [continue] to open up,” Kerry said. “If there were some judgment to the contrary, then it would be rethought. Now the question is in fact what happens.”