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Geithner's China trip to focus on trade

(Agencies/chinadaily.com.cn)
Updated: 2009-05-31 12:56

Trade deficit

Trying to find ways to cut its country's ballooning trade deficit with China, a long-time flash point between the two countries, is also high on Geithner's agenda.

In meetings with President Hu Jintao and Premier Wen Jiabao, Geithner is expected to encourage the Chinese to rely less on exports and to develop a broad-based domestic consumer market, said a senior US Treasury official who briefed reporters on the visit's goals.

"One of the objectives of the trip... is the importance of laying the foundations for balanced, sustained growth in the future," the official said.

"For China this involves stronger domestic demand growth. It involves shifting the structure of the Chinese economy to (spur) domestic demand."

The shift would unleash enormous buying power, which, analysts say, may help pull the world out of recession and narrow America's huge trade gap because the Chinese would buy more American products.

China will also benefit from a major US recovery. "Beijing really wants Washington to be successful in bringing the US economy out of this recession as fast as it can because it is critical to Beijing's own economic growth," said Kenneth Lieberthal, a China expert at the Brookings Institution.

Currency issue

Another way to reduce the deficit, some US manufacturers, legislators and economists believe, is to pressure for a big rise in the yuan value, which will make US products cheaper for the Chinese to buy.

They claim the Chinese currency is artificially devalued, giving the country's exporters unfair advantages. But the Chinese rejected such accusations. The yuan has risen more than 20 percent since July 2005 when China adopted a key reform in its currency regime.

Geithner caused a stir on this issue even before officially taking office, by saying President Obama "believes China is manipulating its currency" during his Senate confirmation hearing in January.

But then he and the Obama administration backed off and have since stayed away from highlighting the issue of currency manipulation. Last month, the US treasury refused to cite China as a currency manipulator in its report.

This time, Geithner is expected to touch on the issue, but in a softer tone so as not to raise tensions with a country which, the Obama administration is convinced, is key to a prosperous global economy.

Analysts said they expect Geithner and the Chinese to pledge to do all it takes to end the recession. Both sides know any hint of discord between the world's largest and third-largest economies probably will unsettle financial markets.

Other agenda

Geithner plans a speech Monday at Peking University, where he studied Mandarin Chinese during the summer in 1981 when he was in college.

He will also hold an event at a Ford Foundation program in Beijing to support the study of economics in the US. The program was started by his father when the elder Geithner was based in Asia as a foundation official.

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