China tells U.S.A. to get economy in order

BEIJING - China is urging Washington to rein in debt-fuelled spending and stabilize its economy in high-level talks on commercial relations, reflecting Beijing's growing economic assertiveness.

Speaking at the opening of the Strategic Economic Dialogue, Vice-Premier Wang Qishan appealed Thursday to U.S. Treasury Secretary Henry Paulson and other officials to take steps to calm the global financial crisis and protect Beijing's investments. China's central bank governor said U.S. financial excesses are to blame for the crisis.

"The important reasons for the U.S. financial crisis include excessive consumption and high leverage," said Gov. Zhou Xiaochuan.

"The United States should speed up domestic adjustment, raise its savings rate and reduce its trade and fiscal deficits."

Paulson said engagement between China and the United States has helped in managing the crisis. Officials said both sides stressed the importance of co-operation to combat a potential rise in trade protectionism.

The two-day meeting, due to wrap up Friday, was not expected to produce breakthroughs on trade or other sensitive issues. The two sides signed a pact Thursday to co-operate in financing for projects to improve energy efficiency.

Speaking earlier as Paulson listened, Wang appealed to Washington to "take the necessary measures to stabilize the economy and financial markets, as well as to guarantee the safety of China's assets and investments in the United States."

Wang did not elaborate but Beijing owns $585 billion in Treasury debt that has helped to finance U.S. budget deficits and its holdings of other U.S. assets are growing. But the weak dollar and financial turmoil have fuelled Chinese anxiety about such investments.

Wang also said Beijing wants to see progress in reforms of international financial institutions -- a reference to its desire for a bigger role in the International Monetary Fund and other bodies.

U.S. officials said China promised more currency reforms. Washington and other trading partners say China's yuan is kept undervalued, giving its exporters an unfair price advantage and adding to its trade surplus. Some U.S. legislators are calling for punitive action against Beijing.

"The Chinese continued to reinforce to us that they were committed to continued reform and by that I mean continued appreciation (of the yuan) over time," said a U.S. official who briefed reporters on condition he not be identified further.

The yuan has risen 20 per cent against the U.S. dollar since Beijing cut its peg to the dollar in July 2005. But it has fallen this week in government-controlled trading -- including a nearly one-per-cent decline Monday, its biggest one-day drop in three years -- in what analysts suggested was a message from Beijing to go easy on the issue.

The yuan's drop Monday also might have been meant as a warning to president-elect Barack Obama, that talks will be more effective than confrontation, said Frank Gong, chief Asia economist for JP Morgan Securities Ltd. Obama has yet to say whether he will continue the dialogue. Some analysts have speculated Obama and the U.S. Congress will take a harder line on China.

China's economic growth is expected to slow this year to about nine per cent, down from last year's 11.9 per cent. Chinese leaders worry about rising job losses and possible unrest.

Beijing is launching a $586-billion stimulus package meant to revive slowing growth through heavy spending on construction and other projects.

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China is urging Washington to rein in debt-fuelled spending and stabilize its economy in high-level talks on commercial relations, reflecting Beijing's growing economic assertiveness.

Speaking at the opening of the Strategic Economic Dialogue, Vice-Premier Wang Qishan appealed Thursday to U.S. Treasury Secretary Henry Paulson and other officials to take steps to calm the global financial crisis and protect Beijing's investments. China's central bank governor said U.S. financial excesses are to blame for the crisis.

"The important reasons for the U.S. financial crisis include excessive consumption and high leverage," said Gov. Zhou Xiaochuan.

"The United States should speed up domestic adjustment, raise its savings rate and reduce its trade and fiscal deficits."

Paulson said engagement between China and the United States has helped in managing the crisis. Officials said both sides stressed the importance of co-operation to combat a potential rise in trade protectionism.

The two-day meeting, due to wrap up Friday, was not expected to produce breakthroughs on trade or other sensitive issues. The two sides signed a pact Thursday to co-operate in financing for projects to improve energy efficiency.

Speaking earlier as Paulson listened, Wang appealed to Washington to "take the necessary measures to stabilize the economy and financial markets, as well as to guarantee the safety of China's assets and investments in the United States."

Wang did not elaborate but Beijing owns $585 billion in Treasury debt that has helped to finance U.S. budget deficits and its holdings of other U.S. assets are growing. But the weak dollar and financial turmoil have fuelled Chinese anxiety about such investments.

Wang also said Beijing wants to see progress in reforms of international financial institutions -- a reference to its desire for a bigger role in the International Monetary Fund and other bodies.

U.S. officials said China promised more currency reforms. Washington and other trading partners say China's yuan is kept undervalued, giving its exporters an unfair price advantage and adding to its trade surplus. Some U.S. legislators are calling for punitive action against Beijing.

"The Chinese continued to reinforce to us that they were committed to continued reform and by that I mean continued appreciation (of the yuan) over time," said a U.S. official who briefed reporters on condition he not be identified further.

The yuan has risen 20 per cent against the U.S. dollar since Beijing cut its peg to the dollar in July 2005. But it has fallen this week in government-controlled trading -- including a nearly one-per-cent decline Monday, its biggest one-day drop in three years -- in what analysts suggested was a message from Beijing to go easy on the issue.

The yuan's drop Monday also might have been meant as a warning to president-elect Barack Obama, that talks will be more effective than confrontation, said Frank Gong, chief Asia economist for JP Morgan Securities Ltd. Obama has yet to say whether he will continue the dialogue. Some analysts have speculated Obama and the U.S. Congress will take a harder line on China.

China's economic growth is expected to slow this year to about nine per cent, down from last year's 11.9 per cent. Chinese leaders worry about rising job losses and possible unrest.

Beijing is launching a $586-billion stimulus package meant to revive slowing growth through heavy spending on construction and other projects.

China is urging Washington to rein in debt-fuelled spending and stabilize its economy in high-level talks on commercial relations, reflecting Beijing's growing economic assertiveness.

Speaking at the opening of the Strategic Economic Dialogue, Vice-Premier Wang Qishan appealed Thursday to U.S. Treasury Secretary Henry Paulson and other officials to take steps to calm the global financial crisis and protect Beijing's investments. China's central bank governor said U.S. financial excesses are to blame for the crisis.

"The important reasons for the U.S. financial crisis include excessive consumption and high leverage," said Gov. Zhou Xiaochuan.

"The United States should speed up domestic adjustment, raise its savings rate and reduce its trade and fiscal deficits."

Paulson said engagement between China and the United States has helped in managing the crisis. Officials said both sides stressed the importance of co-operation to combat a potential rise in trade protectionism.

The two-day meeting, due to wrap up Friday, was not expected to produce breakthroughs on trade or other sensitive issues. The two sides signed a pact Thursday to co-operate in financing for projects to improve energy efficiency.

Speaking earlier as Paulson listened, Wang appealed to Washington to "take the necessary measures to stabilize the economy and financial markets, as well as to guarantee the safety of China's assets and investments in the United States."

Wang did not elaborate but Beijing owns $585 billion in Treasury debt that has helped to finance U.S. budget deficits and its holdings of other U.S. assets are growing. But the weak dollar and financial turmoil have fuelled Chinese anxiety about such investments.

Wang also said Beijing wants to see progress in reforms of international financial institutions -- a reference to its desire for a bigger role in the International Monetary Fund and other bodies.

U.S. officials said China promised more currency reforms. Washington and other trading partners say China's yuan is kept undervalued, giving its exporters an unfair price advantage and adding to its trade surplus. Some U.S. legislators are calling for punitive action against Beijing.

"The Chinese continued to reinforce to us that they were committed to continued reform and by that I mean continued appreciation (of the yuan) over time," said a U.S. official who briefed reporters on condition he not be identified further.

The yuan has risen 20 per cent against the U.S. dollar since Beijing cut its peg to the dollar in July 2005. But it has fallen this week in government-controlled trading -- including a nearly one-per-cent decline Monday, its biggest one-day drop in three years -- in what analysts suggested was a message from Beijing to go easy on the issue.

The yuan's drop Monday also might have been meant as a warning to president-elect Barack Obama, that talks will be more effective than confrontation, said Frank Gong, chief Asia economist for JP Morgan Securities Ltd. Obama has yet to say whether he will continue the dialogue. Some analysts have speculated Obama and the U.S. Congress will take a harder line on China.

China's economic growth is expected to slow this year to about nine per cent, down from last year's 11.9 per cent. Chinese leaders worry about rising job losses and possible unrest.

Beijing is launching a $586-billion stimulus package meant to revive slowing growth through heavy spending on construction and other projects.

Speaking at the opening of the Strategic Economic Dialogue, Vice-Premier Wang Qishan appealed Thursday to U.S. Treasury Secretary Henry Paulson and other officials to take steps to calm the global financial crisis and protect Beijing's investments. China's central bank governor said U.S. financial excesses are to blame for the crisis.

"The important reasons for the U.S. financial crisis include excessive consumption and high leverage," said Gov. Zhou Xiaochuan.

"The United States should speed up domestic adjustment, raise its savings rate and reduce its trade and fiscal deficits."

Paulson said engagement between China and the United States has helped in managing the crisis. Officials said both sides stressed the importance of co-operation to combat a potential rise in trade protectionism.

The two-day meeting, due to wrap up Friday, was not expected to produce breakthroughs on trade or other sensitive issues. The two sides signed a pact Thursday to co-operate in financing for projects to improve energy efficiency.

Speaking earlier as Paulson listened, Wang appealed to Washington to "take the necessary measures to stabilize the economy and financial markets, as well as to guarantee the safety of China's assets and investments in the United States."

Wang did not elaborate but Beijing owns $585 billion in Treasury debt that has helped to finance U.S. budget deficits and its holdings of other U.S. assets are growing. But the weak dollar and financial turmoil have fuelled Chinese anxiety about such investments.

Wang also said Beijing wants to see progress in reforms of international financial institutions -- a reference to its desire for a bigger role in the International Monetary Fund and other bodies.

U.S. officials said China promised more currency reforms. Washington and other trading partners say China's yuan is kept undervalued, giving its exporters an unfair price advantage and adding to its trade surplus. Some U.S. legislators are calling for punitive action against Beijing.

"The Chinese continued to reinforce to us that they were committed to continued reform and by that I mean continued appreciation (of the yuan) over time," said a U.S. official who briefed reporters on condition he not be identified further.

The yuan has risen 20 per cent against the U.S. dollar since Beijing cut its peg to the dollar in July 2005. But it has fallen this week in government-controlled trading -- including a nearly one-per-cent decline Monday, its biggest one-day drop in three years -- in what analysts suggested was a message from Beijing to go easy on the issue.

The yuan's drop Monday also might have been meant as a warning to president-elect Barack Obama, that talks will be more effective than confrontation, said Frank Gong, chief Asia economist for JP Morgan Securities Ltd. Obama has yet to say whether he will continue the dialogue. Some analysts have speculated Obama and the U.S. Congress will take a harder line on China.

China's economic growth is expected to slow this year to about nine per cent, down from last year's 11.9 per cent. Chinese leaders worry about rising job losses and possible unrest.

Beijing is launching a $586-billion stimulus package meant to revive slowing growth through heavy spending on construction and other projects.