US and China to discuss friction issues
Last Updated on Tuesday, 30 November 1999 00:00 Friday, 06 May 2011 22:06
Next week's US- China Strategic and Economic Dialogue meeting will see a range of issues raised by both sides as old (waning?) superpower meets new superpower. It could be another small step in gently pushing the Chinese to allow the Yuan float freely against world currencies and the dollar in particular. The high level meeting between American and Chinese officials takes place over two days in Washington D.C.
At a Chinese press briefing on the meeting, Chinese Vice Finance Minister Zhu Guangyao said China was already deepening the "direction of reform of the yuan exchange rate." While not specifying what he meant by 'direction of reform,' it could be a reference to the bands within which the Yuan is allowed to float before China steps in to manipulate the currency.
The Yuan exchange rate was a sovereign matter, said Mr. Zhu.
Debt sustainability of the U.S. will also be discussed. Mr. Zhu said China hopes the U.S. will adopt fiscal consolidation measures to begin reducing the current deficit but said it was important that the U.S. maintain its economic recovery. China is the largest holder of U.S. bonds and has become to many "America's banker." If America does not take steps to reduce its deficit, there will no other choice but to eventually default on debts. America is expected to hit a deficit of $1.4 trillion this year and overall debt will soon hit the $14.294 trillion legal ceiling.
A U.S. Treasury official quoted by Reuters said, "We are going to be talking about monetary policy, we're going to be talking about exchange rate policy, we're going to be talking about fiscal policy, we'll be talking about reserve management policy."
"That's why we bring people like [Federal Reserve Chairman] Ben Bernanke and [China's Central Bank] Governor Zhou [Xiaochuan] and all the senior officials on both sides together to talk," he added.,
Human Rights abuses in China could be raised but Chinese Vice Foreign Minister Cui Tiankai said he hopes America won't place too much emphasis on individual cases. "We hope it (the United States) will not devote too much energy to individual cases or cases that involve violations of Chinese laws," he said. The soft warning could be the opening salvo over the issue of human rights in China where the regime regularly suppresses dissent, protests and religion. Holding different view from the Chinese government is a dangerous thing in China.
China could raise arm sales by the U.S. to Taiwan, a region China views as something it should own. Military officials from both sides are due to join the discussions for the first time, a move that could serve to reduce military friction and distrust. China's military capabilities have exploded over the last decade and the U.S. is wary of the speed and development of what could soon be the largest military machine in the world.
The US- China Strategic and Economic Dialogue was established by U.S. President Barack Obama and his couterpart, Hu Jintao of China in 2009 in an effort to reduce friction between the two countries.
