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China makes concessions for foreign firms

"An important feature of the discussions is that both sides went beyond the short-term trade issues."

Wu Yi, Chinese vice premier

Beijing has agreed to allow foreign firms to issue yuan-denominated securities in China, the US said yesterday at the close of high-level trade talks.

The US and China declared the talks a success yesterday despite disagreements over China's currency and protectionist sentiment on both sides.

The concession for foreign companies was one of several agreements reached between the two sides that also included greater bilateral cooperation on climate change, energy and combating illegal logging, according to a statement released by the US side.

Under the securities agreement, China pledged to allow foreign invested companies to issue yuan-denominated stocks and bonds.

"There is clearly demand for ... any company doing business in China and investing in China to be able to finance yourself in renminbi," US Treasury Secretary Henry Paulson told reporters after the close of the twice-a-year Strategic Economic Dialogue outside Beijing.

Paulson provided no timetable for introducing the change, saying only he expected it to be "rolled out gradually."

Other agreements reached this week include:

* China has agreed to tighter supervision of manufacturers of food and drug products following a spate of product safety scares in recent months.

* China has raised the investment quota for foreign institutional investors in China to US$30 billion from US$10 billion.

* The two sides will embark on a 10-year period of intensive cooperation on energy issues and the environment.

* China and the US pledged greater cooperation on developing biofuels, low-sulphur fuels and other low-pollution fuel sources.

* Cooperation on combatting illegal logging of timber worldwide to help protect forests and aid the fight against climate change, as trees help to absorb harmful carbon dioxide emissions.

Chinese Vice Premier Wu Yi (吳儀) called the talks a "complete success" that led to greater understanding of the trade stances of each side.

"An important feature of the discussions is that both sides went beyond the short-term trade issues," she said at a joint appearance with Paulson at the close of the talks.

The talks began on Wednesday with both sides warning of rising protectionist sentiment that could harm trade ties.

But Paulson said the two delegations agreed to combat "economic nationalism."

"We both recognized the need to fight economic nationalism and protectionism in our two nations. Countries cannot protect their way to prosperity," he said.

China has made progress in allowing its currency to appreciate, but the US plans to continue to pressure Beijing on the issue, Paulson also said.

"China isn't ready to have a market-determined currency yet, but they need to move in that direction and they're going to continue to hear about it until they get a market-determined currency," Paulson said.

However, he stressed that China had allowed the yuan to appreciate since freeing it up slightly in 2005. The yuan has risen more than 10 percent since then.

"We don't spend a lot of time talking about how fast is fast," Paulson said.

Despite continued US pressure on the yuan, Paulson emphasized that the real culprit in the trade imbalance remained the relatively weak consumption in China, another issue that the US has pushed Beijing to address.

"Those who believe that solving the currency issue ... would get at the imbalances in a really significant way are misinformed," he said.
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