Lew Calls Progress on China Investment Treaty a ‘Breakthrough’

China will negotiate a bilateral investment agreement with the U.S., the first time the world’s second-largest economy has agreed to include all sectors in an accord with another country.

An investment treaty with China “is a priority for the United States and would work to level the playing field for American workers and businesses by opening markets for fair competition,” U.S. Treasury Secretary Jacob J. Lew said in a statement today.

U.S. and Chinese officials, including Vice Premier Wang Yang and State Councilor Yang Jiechi, are wrapping up two days of talks in Washington covering topics ranging from exchange rates to cybersecurity. Yang said the Chinese leadership is committed to economic reforms and the continued opening of its markets.

“The commitment made today stands to be a significant breakthrough and marks the first time China has agreed to negotiate a bilateral investment treaty, to include all sectors and stages of investment, with another country,” Lew said.

Such an agreement is important because it would operate with a presumption of openness, a Treasury official said today in a conference call with reporters.

China also said it would try a pilot free-trade zone in Shanghai that could increase access for foreign enterprises in the service sector, according to the official, who asked not to be identified as a condition for giving the briefing. The specific guidelines for the trade zone haven’t been completed, the official said.

Trade Secrets

The U.S. has made progress in getting China to acknowledge the seriousness of the theft of trade secrets of U.S. companies in China, the official said.

The U.S. has been complaining to China about surveillance of American companies. The issue may be complicated by Edward Snowden’s disclosures about U.S. programs that collect phone and Internet data, and his assertion last month that the U.S. had been hacking into computers in Hong Kong and mainland China since 2009.

Meanwhile, Chinese Finance Minister Lou Jiwei urged the U.S. Federal Reserve to be “highly alert” to the global impact from any decision to begin reducing stimulus by tapering $85 billion in monthly bond buying known as 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,” Lou said. “The U.S. policy not only affects the U.S. but has a spillover effect on the global economy,” especially for emerging markets, he said at a news conference.

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