By Chris Cermak May 30, 2009, 0:28 GMT
Washington - The United States will press China to shift away from its export-oriented economic model when US Treasury Secretary Timothy Geithner makes his first official visit next week to Beijing.
It is a key lesson the United States has taken from the first global recession since World War II: with US consumers cutting back sharply in spending, the United States is warning that a fundamental rebalancing of its economic relationship with China is needed.
While the economic crisis is ongoing, a senior Treasury Department official said that a key focus of the meeting will be the need for the two economic powerhouses to lay a 'solid' and sustainable foundation for future growth.
Geithner will holds talks with Chinese President Hu Jintao, Premier Wen Jiabao and a variety of economic officials during two days of meetings in Beijing beginning Monday.
Geithner's main message will be that China should no longer expect to rely heavily on exports to the United States, which has fuelled growth in the Asian giant for two decades. US imports collapsed 34 per cent in the first three months of the year.
China, meanwhile, will be pressing the United States on its ballooning budget deficit, which is projected to approach 13 per cent of gross domestic product this year as US President Barack Obama battles to revive his country's economy.
Jiabao has in the past expressed concern about the safety of his country's vast reserves in the United States, while other Chinese officials have suggested that the world should move away from the dollar as the chief reserve currency.
Obama has insisted that he will put the United States back on a path toward fiscal discipline once the economic crisis is over, and Geithner will be looking to assuage China's worries.
'The Obama administration believes strongly in fiscal discipline. If the deficit issue comes up, we are fully prepared to discuss it,' the Treasury official said.
As the world economy shows the first signs of emerging from recession, both sides will need a shift in culture. US consumers will be spending less and saving more, moving away from a debt-fuelled society that is partly blamed for the current recession.
China should be doing the opposite, the US believes. The Chinese government should do more to stimulate domestic demand and 'strengthen the comfort' their own people have in spending money, the US Treasury official said.
Geithner's background makes him well-placed to deliver the message. He speaks Chinese and briefly studied at Peking University, where he plans to deliver a speech during his visit on US-China economic relations. Much of Geithner's long career in the Treasury Department has involved East Asia.
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