Treasury Secretary John Snow and Federal Reserve Chairman Alan Greenspan will lead a high-level U.S. delegation to talks in Beijing over economic issues including China’s efforts to reform its currency system.
The fact that the trip this month is being headed by the administration’s chief economic spokesman and Greenspan underscores the desire of the United States to see China accelerate its efforts to have the value of its currency, the yuan, set by market forces.
Last July, China announced it was halting a decade-long practice of tightly linking the yuan’s value to the U.S. dollar. American manufacturers have complained that that practice kept the yuan undervalued by as much as 40 percent against the dollar, giving China a huge competitive trade advantage.
However, China allowed the yuan to rise in value by only 2.1 percent, far below the level that U.S. manufacturers believe is necessary. The U.S. trade deficit with China last year hit an all-time high of $162 billion.
Snow and Greenspan will be joined at the meetings of the Joint Economic Commission on Oct. 16 and 17 by Chris Cox, the new chairman of the Securities and Exchange Commission, and Reuben Jeffery III, chairman of the Commodity Futures Trading Commission, the administration announced Monday.
The JEC serves as a regular forum from U.S. and Chinese officials to get together to discuss economic issues.
By including Greenspan, one of America’s top banking regulators, and the regulators of the U.S. stock market and commodity markets, the administration will have a group that can provide advice to China over what changes it needs to make its its financial regulatory system to allow the yuan’s value to be set by market forces.
At previous meetings, the JEC discussions have involved U.S. pressure on the Chinese to lower trade barriers to U.S. exports of farm and manufactured goods and petitions by the U.S. side for the Chinese to launch a greater crack down on the piracy of movies, music and computer programs.
The administration also announced Monday that it was appointing David Loevinger, a longtime Treasury official, to be the department’s first-ever permanent financial attache stationed in Beijing. Loevinger will be Treasury’s top liaison on questions involving the implementation of a freely floating currency regime.
The Bush administration is coming under increasing pressure on the currency issue from lawmakers upset with America’s record trade deficits with China. Legislation pending in both the House and Senate would impose across-the-board tariffs of 27.5 percent on all Chinese imports unless China makes a greater move to revalue its currency.
But Chinese officials have given no indication that they plan to speed up the process, saying they believed a process of gradualism would serve China better.
Chinese Finance Minister Jin Rinqing and Zhou Xiachuan, the head of China’s central bank, let it be known last month during finance meetings in Washington that they needed to proceed at a pace that made sure that China’s financial system was prepared for increased currency volatility.
The administration had faced a deadline of reporting to Congress on Oct. 15 on whether China should be branded a currency manipulator. Treasury spokesman Tony Fratto told reporters Monday that Treasury will miss that deadline and instead plans to issue the currency report in early November. He said this will allow Treasury officials to include information gathered from Snow’s trip.
In addition to Beijing, Snow is scheduled to stop in Shanghai, to view a new office for China’s foreign exchange trading system, and Chengdu, a city in western China, to get a look at the progress of economic reform outside of China’s major coastal centers.
Before the JEC meeting, Snow and Greenspan will participate in Beijing in meetings from Oct. 11-13 with finance ministers and central bank presidents representing the other countries of the Group of 20 nations, composed of the world’s richest nations and major emerging markets such as China, India and Brazil.
Snow also plans to stop in Tokyo on Oct. 10-11 on his way to China for meetings with Japanese finance officials.