China Confident in U.S., Geithner Says
Wednesday, June 3, 2009
BEIJING, June 2 -- Even as China's state media on Tuesday slammed the country's massive U.S. debt purchases, U.S. Treasury Secretary Timothy F. Geithner said China's leaders believe in "the basic resilience and dynamism of the U.S. economy."
Geithner said the economic and finance officials he met with during his two-day trip did not repeat concerns they have expressed publicly over the past few months about the deteriorating value of their holdings of U.S. Treasurys and about the U.S. dollar's position as the world's dominant reserve currency.
"What I sense is a fair amount of confidence, not just in the basic underlying strength and resilience of the U.S. economy, its dynamism, but in our capacity not just to solve this crisis, get growth back on track, but to go back to living within our means," Geithner told a small group of reporters.
Further, he added, "I believe the Chinese expect the dollar to be the principal reserve currency for a long period of time, as do we."
Geithner's remarks stand in sharp contrast to the commentary in China's official papers.
An editorial in the English-language China Daily said it will be "regrettable if [Geithner] underestimates and shuts his ears to voices from China's civil society," noting that there are worries that "Washington's mushrooming deficit, generated by massive government borrowing to fuel its economic recovery plan . . . will undermine both the dollar and U.S. bonds."
The Global Times, which is affiliated with the Communist Party, said, "Ordinary Chinese people are discontent with the declining value of China's huge foreign exchange reserves denominated in U.S. dollars."
And Economic Information Daily, which is part of the official New China News Agency and affiliated with the State Council, in a headline demanded to know of Geithner: "How do you propose implementing fiscal discipline? How will you maintain the stability of the dollar after the crisis?"
Yu Yongding, a former central bank adviser who is now a researcher with the government-affiliated Chinese Academy of Social Sciences, interviewed Geithner for the China Daily on Tuesday. He said that the interview focused on the security of China's foreign reserves that are held in dollars and that he was skeptical of the Treasury secretary's assurances.
"I did not hear specific measures the U.S. will be taking to assure the safety of Chinese foreign reserves. That is something worrisome to me," Yu said in an interview.
"The U.S. government should not be complacent, and it should understand that there are alternatives to China buying U.S. bonds and bills," he added. "Investment in euro assets is such an alternative, and there are lots of raw materials we can buy, too. China should not close its options."
Geithner emphasized that he has been speaking about these issues with his counterparts for several months and said the main purpose of the trip was more to lay the foundation for long-term cooperation than to discuss specific issues.
"We're overwhelmingly focused on getting the world economy on track," he said.
To that end, Geithner said, "We want to be very careful that as we come out of this we don't re-create the conditions established, really, in the last recovery that led to, helped contribute to, this extraordinary financial and economic crisis."
During his trip, which included meetings with President Hu Jintao and Prime Minister Wen Jiabao, Geithner called for increased cooperation between the United States and China in leading the world out of economic crisis. He said the United States would make sure its current account deficit is reduced and would increase its savings rate. And he called on China to shift from its export-driven model to one focused on domestic consumption. He said he supports a larger role for China in global financial institutions such as the International Monetary Fund.
"The world is not going to be able to look to the United States as it was able to do in the last several recoveries and expect consumption in the United States to lead the world out of this," Geithner said.
Researcher Wang Juan contributed to this report.