US and China display united economic stance - Countries at odds over climate change

US and China display united economic stance - Countries at odds over climate change
By Daniel Dombey and Sarah O’Connor in Washington
Copyright The Financial Times Limited 2009
Published: July 29 2009 00:29 | Last updated: July 29 2009 00:29
http://www.ft.com/cms/s/0/63165076-7bcd-11de-9772-00144feabdc0.html


The US and China sought to present a common front on Tuesday on economic co-operation but remained at odds over climate change at the end of two days of top-level consultations that highlighted Beijing’s growing confidence and assertiveness.

While both sides hailed the importance of consulting with each other – and confirmed that President Barack Obama would visit China later this year – the meeting failed to produce any extensive new agreements.

“Laying the groundwork [for closer ties] may not deliver a lot of concrete achievements immediately,” acknowledged Hillary Clinton, secretary of state. But she added the level of co-operation had been unprecedented.

The US and China are perhaps the world’s main champions of fiscal stimulus and Beijing is broadly sympathetic to Washington’s call, reiterated on Tuesday by Tim Geithner, Treasury secretary, for China to increase its domestic consumption and decrease its reliance on exports.

“Co-operation between China and the US will remain vital not only to the well being of our two nations but also the health of the global economy,” said Mr Geithner, stressing the two countries’ agreement “to undertake policies to bring about sustainable, balanced global growth once economic recovery is firmly in place.”

While the US reiterated a promise to lower its burgeoning deficit by 2013, China agreed to rebalance towards domestic demand-led growth, as it has in the past. And while the US emphasised its plans for tougher financial sector regulation, China signalled its intention to liberalise its own financial sector.

In a series of commitments that echoed other pledges made in the past, Beijing also promised to raise the dollar threshold of foreign investments requiring central government review and to treat companies with foreign investment the same as domestic producers when granting government contracts.

But as the world’s biggest holder of US Treasury bonds, China remains very uneasy about the safety of its investment in hundreds of billions of dollars – although its exposure to the US currency constrains Beijing’s ability to criticise US monetary policy.

“As a major reserve currency-issuing country, the US should properly balance and properly handle the impact of the dollar supply on the domestic economy and the world economy as a whole,” said Chinese vice-premier Wang Qishan at an event with Mr Geithner earlier in the day.

He later pronounced himself content with Washington’s assurances that the US would meet its financial commitments.

The two sides also signed a memorandum of understanding on climate change that committed them to intensified bilateral discussions of the issue and highlighted the importance of success in international negotiations in a United Nations meeting in Copenhagen later this year.

But Xie Zhenhua, vice-minister of China’s national development and reform commission, said developed countries had to take the lead in substantially reducing emissions and in committing to technology transfer and financing for industrialising countries to control their own carbon emissions.