China and US to cooperate on battling financial crisis (Roundup)

Dec 4, 2008, 9:51 GMT

   Beijing - China and the United States vowed Thursday to cooperate in dealing with the global financial crisis, as the US pressured China to reform its currency and China urged the US to stabilize its economy.

   At the fifth Strategic Economic Dialogue (SED), China reacted to pressure by US Treasury Secretary Henry Paulson to let its yuan rise against the dollar, as an undervalued yuan gives Chinese exporters an unfair advantage. 

China stressed that the yuan had become more flexible, its exchange rate increasingly governed by the market. China was to continue on this course while at the same time safeguarding the stability of its currency, Foreign Ministry spokesman Liu Jianchao said.

Over three years, the yuan strengthened versus the dollar by 20 per cent, however, this trend stopped in May. This week, China's central bank depreciated the yuan against the dollar, fuelling US criticism that China was making its exports cheaper by using currency manipulation.

   The two-day meeting will focus on cooperation to deal with the financial crisis and strengthening the Sino-US economic partnership, said Chinese Vice Premier Wang Qishan, who co-chairs the meeting with Paulson.

   'The most pressing issue we have to deal with is coping with global financial turmoil,' Wang was quoted as saying at the outset of the meeting by the official Xinhua news agency.

     'It is imperative for us to work together to implement the consensus reached at the G20 summit,' Wang said, referring to a meeting of leaders from the 20 richest countries and emerging markets in Washington in mid-November.

China was doing its part to boost domestic demand with a large-scale stimulus programme and a more flexible fiscal policy, Wang said.

Wang urged the United States to 'go all out to stabilize the economy and the financial market, and ensure the safety of China's assets and investment in the United States.'

   In his opening remarks, Paulson, who initiated the twice-yearly SED in 2006, said that work would continue on 'strategies for managing macroeconomic risks and promoting balanced growth, on open investment and trade policies, including strengthening products, food and drug safety, on our respected roles in international institutions and to strengthen cooperation in energy and the environment.'

   'For the first time during the SED, the United States and China will focus on how we work together through international forums to strengthen the global economic system,' he said.

The talks were expected to 'reach substantive agreements,' Paulson said.

Paulson is accompanied by the US trade representative to China, Susan Schwab, and the US cabinet secretaries for agriculture, labour, health and environment. Ten Chinese ministers are participating in this round of talks.