Tags: AS | China | US | Economy

Geithner Vows to China That US Will Tame Its Wild Deficit, Learned From Crisis

Tuesday, 25 May 2010 07:29 AM

U.S. Treasury Secretary Timothy Geithner said Washington is getting its deficits under control and called on China to keep technology markets open in a visit Tuesday to a school for future Communist Party leaders.

On the second day of a high-level dialogue, Geithner told students at the Central Party School the United States has learned from the crisis and is improving regulation. He said Washington was moving forcefully to cut its swollen budget deficit — a key worry for Beijing, the biggest foreign investor in U.S. government debt.

The Strategic and Economic Dialogue brought dozens of U.S. officials led by Geithner and Secretary of State Hillary Rodham Clinton to Beijing. Begun last year in Washington, the dialogue is aimed at easing trade strains and promoting cooperation on issues from financial markets to clean energy research.

"The basic strategy is to make sure that our economy is growing, then institute long-term reforms and restore the basic discipline to the budget process that we abandoned in the previous decade," Geithner said.

The party school is a mid-career training center for rising officials from provincial governments. Geithner's visit was billed as a chance for Washington to reach beyond Beijing and address a future generation of communist leaders.

Geithner called on China to keep technology markets open, saying competition would promote innovation. Washington and business groups are alarmed by Beijing's "indigenous innovation" policy, meant to promote Chinese technology by favoring domestically developed products in government procurement and other areas. Foreign companies say the policy is the biggest threat to their access to Chinese markets and Geithner said he would raise the issue at the dialogue.

"You want the marketplace to work with you and not against the objective of promoting innovation," the secretary said.

The talks have highlighted the communist government's growing assertiveness in promoting its own interests, prompted by China's rising status as the world's third-largest economy and its quick rebound from the global downturn.

On Monday, President Hu Jintao opened the dialogue with a pledge of more reforms to China's currency controls, a key irritant in ties with Washington. But he gave no timetable and said Beijing will set the pace of change.

Washington and other trading partners complain China's yuan is undervalued, giving its exporters an unfair advantage and swelling its multibillion-dollar trade surplus. The yuan has been frozen against the dollar since late 2008 to help Chinese exporters compete amid weak global demand.

The talks were overshadowed by South Korea's announcement that it was cutting off trade with North Korea and would take its neighbor to the U.N. Security Council over a torpedo attack that killed 46 sailors.

Beijing's envoys pressed a range of Chinese interests, calling for an end to U.S. curbs on "dual use" high-tech exports with possible military applications. They urged Washington to simplify foreign investment rules that they complained hurt Chinese companies.

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