In These New Times

A new paradigm for a post-imperial world

US calls for China to have greater say in world economic affairs

Posted by seumasach on June 2, 2009


11st June, 2009

On the day US car giant General Motors filed for bankruptcy protection, Mr Geithner, said that mutual co-operation between China and the US was now fundamental to bringing the world out of the global financial crisis.

“China is already too important to the global economy not to have a full seat at the international table,” Mr Geithner said in a speech at the University of Peking, promising to support greater representation for China in world financial institutions.

Mr Geithner also sought to allay growing Chinese fears that the value of the £475bn-worth of US treasuries held by China is in danger of being undermined by ultra-loose US monetary policy.

Last March, the Chinese premier, Wen Jiabao, who will meet with Mr Geithner today admitted that China was “concerned about the safety of our assets” as the US ran up massive debts to offset the effects of the financial crisis.

“Chinese assets are very safe,” Mr Geithner said in response to a question, although his answer drew loud laughter from his student audience, reflecting popular scepticism in China about the wisdom of investing so heavily in the dollar.

However Mr Geithner pledged that “as soon as recovery is established” America would take tough action to reduce its mounting fiscal, including “very disciplined” budget constraints that would mean enforced cuts in government spending.

Later in the day, China’s vice-premier, Wang Qishan, who will travel to Washington in July for further economic dialogue, echoed Mr Geithner’s remarks on the importance of China-US co-operation.

“We must through our dialogue send a clear signal that China and the US are engaged in practical co-operation to address the crisis,” Mr Wang told Mr Geithner.

“This is important for boosting confidence and encouraging global financial stability and economic revival.”

In exchange for vigorously protecting the value of China’s dollar assets and supporting China in winning greater voting rights on institutions like the International Monetary Fund, Mr Geithner asked that China take more radical steps to boost spending at home and grant more access for US companies seeking to invest there.

China has called for increased voting rights in international financial institutions including the IMF to reflect its status as arising economic power before it makes further contributions to funds to stabilise the world economy.

Mr Geithner made only a passing mention of the vexed question of the value of Chinese currency, which the US has long argued is artificially low, arguing that a stronger yuan would boost domestic Chinese demands by cheapening imports.

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