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US urges China to speed up reforms

US Treasury Secretary John Snow and other top US economic officials yesterday urged China to move faster in market-opening and currency reforms, laying out guidelines they said would make the country wealthier and more stable, while also reducing its huge trade surplus.

At annual China-US economic talks that were due to end yesterday, the US side broadened its calls for reform beyond the currency issue to a wider set of demands -- a strategy allowing the administration of US President George W. Bush to point to progress in other areas while avoiding confrontation with Beijing in an area where it says it cannot move any quicker.

"To say we have a roadmap would be too grandiose a characterization," Snow said. But he added, "We do have a long list of things that are being worked on that we're suggesting need to be dealt with."

There was no immediate reaction from the Chinese side on the US proposals. But Snow and others said they were encouraged by the descriptions by Beijing's central bank governor, finance minister and other leaders of moves to make currency policy more flexible, privatize state-owned companies and improve scandal-laden, developing financial markets.

China's ruling Communist Party recently signed off on a five-year plan focused on pushing ahead with financial reforms while also seeking to reduce the huge gap between the city dwellers who have benefited most from the nation's economic boom and the hundreds of millions of farmers who lag far behind.

Snow applauded those objectives but urged the leadership to do more to build up social welfare services and financial institutions that would offer broader, safer investment options, giving Chinese alternatives to stashing money in bank accounts while also encouraging more consumer spending.

"As China moves toward a more consumer-based society, the savings rate will go down and consumers will spend more, allowing China to buy more from the United States," he said.

"Underscoring everything we're doing is a recognition that everything we're doing is a positive sum game," Snow told reporters. "China's success helps the global economy; our success helps the global economy."

Still, Snow said he needed to see more progress toward loosening controls on the yuan to head off complaints back in Washington.

"We will continue to look hard and evaluate if real progress is being made," he said.

Federal Reserve Chairman Alan Greenspan also participated in the talks, but was not present at a midday news conference and did not make any remarks to the press.

Chinese officials have said that, for the sake of stability, they will let the yuan's value adjust gradually following a 2.1 percent revaluation in July, when Beijing gave up a decade-old peg to the US dollar and began linking the yuan to a basket of currencies that also includes the yen and the euro.

Some US manufacturers contend the yuan is undervalued by as much as 40 percent, making Chinese goods cheaper overseas and contributing to China's trade surplus with the US, which hit a record US$162 billion last year.

The US Congress has reacted to the gap with calls for more forceful action, with some lawmakers backing legislation that would impose 27.5 percent tariffs on all Chinese imports unless Beijing takes more steps to allow its currency to rise in value against the dollar.
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