US, China Pledge to Increase Economic, Political Cooperation

U.S. Secretary of State Hillary Clinton (r) and China's State Councilor Dai Bingguo at the State Department in Washington, 28 Jul 2009

An unprecedented two-day dialogue of top U.S. and Chinese officials ended in Washington Tuesday with pledges by the two governments to work more closely together on political, economic and environmental issues. Secretary of State Hillary Clinton said China shares U.S. concerns about the prospect of a nuclear-armed Iran.

The meeting, bringing together Secretary of State Hillary Clinton, Treasury Secretary Timothy Geithner and their Chinese counterparts was dominated by the economic track, and the need for the two powers to coordinate efforts to overcome the global economic crisis and restore stability.

But Clinton, at a closing news conference, said she and Chinese State Councilor Dai Bingguo, the Beijing government's ranking foreign affairs adviser, covered shared concerns about the North Korean and Iranian nuclear programs and that China is no less troubled than the United States about the prospect of a nuclear-armed Iran.

"China shares our concerns about Iran becoming a nuclear weapons state," said Hillary Clinton. "The potential for de-stabilizing the Middle East and Gulf is viewed similarly by the Chinese as it is by us, if Iran, in its pursuit, triggers an arms race And we had some very useful exchanges of information there."

On the economic side, Treasury Secretary Geithner said his Chinese interlocutor - Vice Premier Wang Qishan - promised that Beijing would step up domestic economic demand so that its recovery from the global downturn would be less dependent on exports - to the United States and elsewhere.

He said the United States, in turn, would move to assuage Chinese concerns by reducing its huge budget deficits as soon as economic conditions permit, to help shore up the dollar and protect the value of China's vast investments in the United States.

"As we move to raise private savings in the United States, as we move to bring down our fiscal deficit in the future, as we move to put in place a more stable, more resilient financial system in the United States, we need to see actions in China, and other countries, to shift the source of growth to domestic demand," said Timothy Geithner. "Those are necessary complements. They have to work together. And I think that's the most important strategic achievement here."

Treasury chief Geithner and Vice Premier Wang said the two countries would maintain economic stimulus efforts until recovery becomes evident. They gave no specifics about how the two governments intend to meet their commitments to rebalance their economies after recovery, and also avoided mention of sharp differences over currency valuations.

But earlier Tuesday, Vice Premier Wang warned the Obama administration against letting the dollar's value slide too far - saying that as a major reserve-currency nation, the United States should properly balance and properly handle the impact of the dollar supply on the world economy.

China, running huge surpluses in trade with the United States, is the largest single investor in U.S. Treasury bonds -more than $1 trillion worth. U.S. officials have said the trade imbalance is partly due to an artificially low valuation of China's currency, though Geithner avoided mention of that Tuesday.

The two sides signed a memorandum of understanding to boost cooperation on combating climate change, and pledged their support for free trade and a successful conclusion of the Doha round of world trade negotiations.

Chinese State Councilor Dai said the dialogue, and the China trip planned by President Obama later this year, will be seen in retrospect as historic milestones in the bilateral relationship.