The U.S. said China’s new government is moving toward a more market-based and open economy, and the two nations expressed willingness to negotiate an investment treaty binding the world’s biggest growth engines.
“China’s leaders have indicated that they will continue to make significant changes to the exchange-rate system, the financial system, state-owned enterprises and the existing mix of taxes on businesses,” Treasury Secretary Jacob J. Lew said after two days of meetings in Washington. “While today’s commitments do not resolve all of the concerns of either side, they do represent real progress.”
Lew’s counterpart, Vice Premier Wang Yang, cited positive results for his country, saying the U.S. agreed to treat Chinese investors fairly. The cross-border investment pact, which Lew called a “significant” step, would be the first one in which the world’s second-largest economy has agreed to include all industries in an accord with another country, the U.S. Treasury Department said.
“If China negotiates a treaty that not only protects investments after they are made, but also improves U.S. investors’ access to the Chinese market, this would be a real breakthrough,” said Clay Lowery, a vice president at Washington-based Rock Creek Global Advisors LLC who was assistant Treasury secretary for international affairs during the George W. Bush administration. “It would mean greater transparency for investors and an opportunity to address real market access concerns.”
The discussions between Lew, Secretary of State John Kerry and their Chinese counterparts, Wang and State Councilor Yang Jiechi, focused on economic issues after Edward Snowden’s leak of U.S. surveillance secrets complicated the national-security discussions. Kerry left the talks early to be with his hospitalized wife and was replaced by his deputy William Burns.
During the closing statements, Burns criticized China for letting Snowden leave Hong Kong last month. Yang replied that China acted in accordance with the law, and the government’s handling of the matter was “beyond reproach.”
Addressing China’s concern about restrictions on the purchase of American companies, Wang urged the U.S. to ensure that rulings of the Committee on Foreign Investment in the U.S., or CFIUS, are based on national security.
The committee is reviewing Shuanghui International Holdings Ltd.’s proposed $4.7 billion purchase of Virginia-based Smithfield Foods Inc., the world’s largest pork producer, amid public unease about Chinese investments.
Among the issues the U.S. wants China to address is the government’s control over the value of its currency, the yuan. Lew said “China is committed to further exchange-rate reform” and is “actively considering” joining a global standard for the reporting of reserves to the International Monetary Fund.
While the Treasury secretary said the U.S. economy is strengthening, Chinese economic officials today cautioned that the Federal Reserve should weigh the wider impact of its eventual withdrawal of monetary stimulus, called quantitative easing.
“We support the Fed’s consideration of exiting from QE, but it should heed the impact of its policy on the global economy and financial markets,” Chinese Finance Minister Lou Jiwei said today. “The U.S. policy not only affects the U.S. but has a spillover effect on the global economy,” especially for emerging markets, Lou said at a press conference.
China’s economic growth has been slowing. The IMF earlier this week projected that China’s economy will grow 7.8 percent this year and 7.7 percent in 2014.
Lou said he’s confident in achieving a 7 percent growth rate this year. That is lower than the government’s official growth target of 7.5 percent.
U.S. gross domestic product is forecast to expand 1.7 percent before accelerating by 2.7 percent next year, according to the Washington-based fund.
Earlier today, officials including Lew, Burns, U.S. Commerce Secretary Penny Pritzker, and Wang and Yang attended a meeting with business leaders.
The chief executive officers included Laurence D. Fink of BlackRock Inc., Ellen Kullman of DuPont Co. and Patricia Woertz of Archer-Daniels-Midland Co. Chang Zhenming, chairman of CITIC Group Corp., and Tian Guoli, chairman of Bank of China Ltd., were among the Chinese executives, the Treasury said in a statement. The executives said their priorities include protection of intellectual property rights, cybersecurity and streamlining regulation, the Treasury said.
China and the U.S., which together burn more than 40 percent of the world’s coal, also agreed yesterday to jointly develop technology to capture carbon dioxide from power plants and take other steps to combat climate change.
The two nations will implement “large-scale, integrated” demonstration projects aimed at capturing, utilizing or storing carbon dioxide, according to a statement released by the State Department. “These demonstrations will engage companies in both countries and allow for enhanced trade and commerce.”