At the invitation of U.S. Treasury Secretary Lawrence Summers, Chinese Finance Minister Xiang Huaicheng led an official delegation to the United States to co-chair the 13th session of the China-U.S. Joint Economic Committee (JEC) on October 26. Senior officials had an opportunity to discuss developments in macroeconomic policies and structural reforms in the two economies, cooperation on enforcement issues, and initiatives to promote growth in less developed areas in each economy. Both sides reaffirmed their commitment to complete China's accession to the World Trade Organization. They agreed China's accession would strengthen bilateral trade relations and provide further impetus to structural reforms in China.

Discussions focused on:

• Macroeconomic Policies and Structural Reform. Both sides agreed that the global economic situation is positive. Inflation remains low, and growth is strong in most emerging market economies. However, they noted the risks posed by oil price volatility to the world economic recovery and for developing economies that are heavily dependent on oil market conditions, and the need to stabilize prices at sustainable levels.

• The two sides noted that, in the United States, growth remains strong, unemployment low and inflation contained. For a sustainable rate of growth to be maintained, fiscal and monetary policy should continue to be prudent and the national savings rate should increase.

• For China, the economy continued to maintain strong growth this year. Deflationary pressure has eased. Reform of state-owned enterprises, the social security system and the financial sector, including strengthening banking supervision, is ongoing. As a result, economic restructuring necessary to put China's economy on a sustainable, market-oriented path has been moving forward. Both sides emphasized that China's prospective accession to the WTO in the near term will further promote China's integration into the world economy and promote global trade and investment. Both sides stressed the importance of further steps to increase transparency and improve data dissemination.

• Given the prospect of China's increased global integration, and the relatively benign external environment, both sides noted the importance of China's moving, over time, toward greater exchange rate flexibility, which will facilitate China's adjustment to ongoing structural changes.

• They welcomed the establishment of the U.S.-China Financial Dialogue, co-chaired by finance and central bank deputies, noting that this mechanism can be a useful tool for countries modernizing and liberalizing financial sectors.

• Regional Cooperation. Both sides believe that enhanced regional cooperation, in the context of economic globalization, contributes positively to world stability and growth. In this regard, they noted recent developments in Asia under the "ASEAN+3" framework. They noted that cooperative financing arrangements at the regional level designed to complement resources provided by the IFIs in support of IMF programs can be effective in crisis prevention and resolution.

• Combating Financial Abuse. The two sides agreed that abuses such as corruption and money laundering undermine the credibility and efficiency of the international financial system. Both sides looked forward to enhancing cooperation in this area and noted the opportunity provided by the recent agreement to establish an APEC working group charged with conducting a survey of domestic legal and regulatory frameworks for fighting financial crime.

• Enforcement. They discussed ways to strengthen cooperation under existing agreements regarding trade in goods made by prison labor. They discussed the progress of the Shanghai model project and completing it as scheduled.

• Regional Economic Development Initiatives. They also discussed policies to address economic disparities among various areas in each of their economies. The Chinese side described its Western Development Strategy and the U.S. side shared experience from its New Markets and other regional economic development initiatives.

• He stressed the importance of the regular meetings between the leaders of the two countries, which laid the foundation for bilateral cooperation. Particularly, in their New York's meeting in September, President Jiang Zemin and President Clinton stressed that both sides should broaden exchanges and enhance cooperation.

• He pointed out that the Chinese Government has made the proposal of formulating the 10th 5-Year Plan, which states that development is the theme with the economic restructuring at the core, reform and opening-up and technological advancement are the driving forces, and improving the living standards of the Chinese people is the ultimate goal.

• He pointed out that China's Western Development strategy will improve the ecological environment of the Western region, and promote balanced regional growth.

• He pointed out that U.S economic performance has great impact on the world economy in general, and on the countries recovering from the crisis in particular. He urged the U.S. authorities to continue to pursue sound economic and financial policies. Such policies should further contribute to the economic prosperity of developing countries and global financial stability.

• He stressed the significance of China's prospective WTO accession and welcomed the Chinese authorities' intention to let the market play the central role of resource allocation in the economy. In his view, it is important that the public listing of SOE shares lead to changes in corporate governance. He noted the progress made on state-owned enterprise reform, while stressing the importance of further steps, including the need for hard budget constraints, operational restructuring and the closing of non-viable firms.

• He welcomed the publication of a Public Information Notice following China's July Article IV Review at the IMF.

• In the critical area of financial sector strengthening, the Secretary welcomed China's intention to liberalize interest rates. He noted the importance of adopting international banking standards, and stated that participation in the World Bank/IMF Financial Sector Assessment Program would provide policy advice in an area crucial to China's financial sector reform agenda.

• He expressed concern about medium-term fiscal sustainability, particularly in light of contingent liabilities in the financial sector, likely future outlays for social safety nets, pensions, infrastructure, and the environment. He emphasized the importance of limiting the budget deficit and new non-performing loans in the banking system.

Participation on the U.S. side included representatives from the Treasury, Federal Reserve, Customs, Office of the U.S. Trade Representative, National Economic Council, Council of Economic Advisors, Department of State and Department of Commerce. The Chinese Delegation included representatives from the Ministry of Finance, People's Bank of China, Ministry of Foreign Affairs, State Development Planning Commission, State Economic and Trade Commission, Ministry of Public Security, Ministry of Justice, Ministry of Foreign Trade and Economic Cooperation, General Administration of Customs, and China Securities Regulatory Commission.

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Economic and Trade Policy | East Asian and Pacific Affairs | Department of State