US: China can balance own growth

Updated: 2013-07-16 10:51

By Joseph Boris in Washington (China Daily)

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China doesn't need a "tradeoff" between structural reforms to its economy and growth that continues to raise living standards, a senior US Treasury Department official said.

She also said Beijing's new leadership understands and appears committed to making structural changes, citing progress made during talks in Washington last week between senior US and Chinese officials.

Lael Brainard, undersecretary of the Treasury for international affairs, was asked on Monday at a think tank whether China might try to delay action on major reforms until the global economy is more stable.

"The message that we're hearing is that these are precisely the kinds of reforms that they [Chinese officials] know are now necessary" to increase domestic demand and Chinese consumers' buying power, Brainard said in recalling the fifth US-China Strategic and Economic Dialogue.

She acknowledged, however, that because "China is just such a big part" of the world economy, its policy decisions are increasingly a key concern at gatherings such as the Group of 20. Finance and labor ministers as well as central bankers from the G20 developed and emerging economies will meet on Friday and Saturday in Moscow.

In the S&ED discussions, Brainard said, "we did not see a tradeoff" for China between short-term growth and long-term reforms.

China's National Bureau of Statistics reported on Monday that GDP growth slowed to 7.5 percent in the second quarter compared to the same period last year. That compares to 7.7 percent in the first quarter.

The Treasury official also credited the two-day talks' progress toward an investment treaty that China and the US began negotiating in 2008, with no breakthrough until Thursday.

As outlined last week, China has agreed to move from a "restricted-list approach" to a fuller embrace of potential competition from American companies in financial services, transportation and other service sectors.

"That's a very important change that we think is both enhancing to growth in China but also provides some important opportunities more broadly," said Brainard, who was among more than 40 officials from both countries involved in the S&ED.

"We heard about their plans to move further on the market determination of exchange rates and liberalization of their capital account. All of those things will move away from a very resource-intensive model and a model that is no longer sustainable for China, to a model that is cleaner and more promising for China's domestic consumers and of course for Americans and for the world."

The US side, she added, was briefed on details of a plan for a free-trade and investment zone in Shanghai that would let Chinese and foreign companies compete on equal terms, adding "dynamism" to service industries.

Brainard, speaking at the Carnegie Endowment for International Peace, also addressed European economies' risk of "protracted stagnation" unless public policies are undertaken to stimulate domestic demand. She said the US supports the role of the International Monetary Fund in helping stabilize the 17-member euro zone.

Risks in Europe and emerging markets, along with the Chinese economy, will be on ministers' and central bankers' minds at this weekend's G-20 meeting.

Brainard, answering a question, downplayed the risk to emerging markets of capital outflows tied to concerns over the eventual end of the US Federal Reserve's loose monetary policy.

"If we look across [emerging markets] broadly, we see more resilience as a group," she said.

(China Daily USA 07/16/2013 page1)