Wednesday, 23 May 2007

Impatient US meets resistant China

It appears that the talks between the US and China have not gotten off to a good start. AFP/CNA reports:

Facing increasing pressure from lawmakers, the United States called on China on Tuesday to step up economic reforms at high-level talks, but Beijing cautioned Washington against politicising trade relations between the two key powers.

US Treasury Secretary Henry Paulson, in his opening remarks at the two-day "strategic economic dialogue" meeting, underlined "persistent trade and financial imbalances" and sought prompt action from China to redress them, saying Americans were "impatient"...

In an apparent reference to increasing anxiety in the US Congress, Paulson said there was growing "anti-China sentiment" in the United States as China became "a symbol of the real and imagined downside of global competition."

[Chinese Vice Premier Wu Yi] did not mince words in her opening comment.

"Politicising trade and economic issues is absolutely unacceptable" and would "complicate the situation," warned the "iron lady" of China.

She also cautioned against what she called the danger of injecting politics into US economic and trade relations.

Unfortunately, it is all very much about politics. The Financial Times writes (via Yahoo! Finance):

For more than three years, Beijing has shouted from the rooftops that its economy is out of balance: too reliant on exports and investment for growth, with a dangerously high share of output from energy-intensive, polluting heavy industries.

But the plethora of policies rolled out to rebalance the economy has had little, if any, impact, partly because of their timidity and partly because the system is not responsive...

The time-worn analogy of turning around a supertanker is often used to illustrate the government's policy task. It might be more accurate to liken the Chinese economy to a flotilla of large and small boats, all steaming ahead at full bore, with little regard to the direction of the fleet or the diktats of its commanding officers in Beijing...

Meanwhile, China's political calendar, and the caution of Wen Jiabao, the premier, who is in charge of economic policy, makes any radical deviation from the incremental approach to reform unlikely in the near-term. Senior policymakers have become even more risk-averse and resistant to overt foreign pressure than normal in advance of the ruling Communist party's five-yearly congress later this year, which is expected to usher in sweeping changes to the leadership. The US, which is entering its own political season earlier than usual in the run-up to next year's presidential election, acknowledges the timing may not be right for the kinds of changes Washington wants.

"The great risk we face is that our respective political calendars are out of sync," said David Loevinger, the US Treasury representative in Beijing, in a recent speech. "The problem faced is: just at the point the US, for our own political reasons, really need a response by the Chinese, the Chinese are unable to provide it."

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