Deals signed but big issues remain
China and the US ended their two-day, high-level economic talks with new commitments by Beijing on financial sector reform but little progress in resolving differences over currency and trade.
Progress made in the third Strategic Economic Dialogue included Beijing's commitment to let foreign companies doing business on the mainland - including banks - issue yuan-denominated stocks and bonds. Beijing also agreed to study lifting ownership caps for banking and securities firms.
Agreements were also reached on co-operation in environmental protection and the quality and safety of exports, according to a joint statement issued after the talks.
Vice-Premier Wu Yi hailed the talks as a 'complete success', while US point man, Treasury Secretary Henry Paulson, described the talk as 'substantive, robust and engaging exchanges'.
In his meeting with Mr Paulson late yesterday, Premier Wen Jiabao said the talks between the two countries had been 'fruitful'. In a separate meeting with Hu Jintao , Mr Paulson told the president the dialogue 'makes it easier to deal with our conflicts and difficulties'.
Despite offering little by way of mutual concessions, China's 'iron lady' lauded the meeting as a 'leap forward' for shifting from 'simply focusing on hot economic and trade issues' to approaching the bilateral relationship from a 'strategic perspective'.
'Both sides should observe the comprehensive, strategic and long-term positioning of the Strategic Economic Dialogue and let it provide policy guidance to other joint economic collaboration mechanisms,' Ms Wu said in her closing comments.
There was no announcement on US demands that China take bolder action in moving towards a more flexible currency regime. But the People's Bank of China let the yuan rise yesterday to its highest level since the central government delinked the currency's peg to dollar in July 2005.
During the talks, the Chinese side showed little inclination towards allowing the yuan to appreciate on anything but its own terms and blamed bilateral trade imbalances on US internal economic problems.
Analysts said the talks produced limited results, falling short of expectations of the US Congress and those also sought by US administration officials. 'It apparently fails to address their differences over the yuan's exchange rate and the trade deficit, which top US concerns,' said Lu Xiaobo, director of Columbia University's Institute of Oriental Studies.
Professor Lu said the Chinese side's more cautious approach on trade issues reflected the Beijing leadership's preoccupation with the risks facing its own economy, which showed increasingly obvious signs of overheating and inflation.
However, Mr Paulson said the Chinese government shared his view that a more flexible currency policy was in China's interest. Chinese officials had also expressed concerns about the risks of further liberalising their financial system, given problems in the US economy that had alarmed some in Beijing, he said.
'The Chinese recognise growing inflationary pressures in their economy and that a more flexible currency expands their ability to use monetary policy to stabilise their economy,' Mr Paulson said at a joint press conference with Ms Wu.
He said both sides recognised the need to fight economic nationalism and protectionism in their nations.
While Ms Wu had cautioned the US against 'politicising' trade issues and took exception to recent US cases against China filed with the World Trade Organisation, US Trade Representative Susan Schwab said Washington would continue to haul China before the world trade body.
But Assistant Minister of Foreign Affairs Zhu Guanyao said that while China had fully implemented what it had agreed to in previous talks, the US had not, citing its slow action in allowing Chinese banks to set up branches in the US.
The next round of talks will be held in Washington in June.