President Barack Obama is briefed by Treasury Secretary Timothy F. Geithner in the Oval Office, Feb. 16, 2010. (Official White House Photo by Pete Souza)
WASHINGTON — Treasury Secretary Timothy F. Geithner previewed the administration’s position on U.S./China economic relations leading into Chinese President Hu Jintao’s visit to Washington next week.
Geithner, speaking on Wednesday at his alma mater, Johns Hopkins University, said China needs to change its economic system. The final words of his speech: “China has no choice.”
The speech outlined U.S. propositions, objectives, and concerns about China. The two countries, both economic superpowers, have no choice but to collaborate, Geithner said.
“This is not a tenable policy for China or for the world economy,” Geithner said. “We believe it is in China’s interest to allow the currency to appreciate more rapidly in response to market forces. And we believe China will do so because the alternative will be too costly – for China and for China’s relations with the rest of the world.
According to Geithner, China has allowed their currency to appreciate only about three percent against the dollar. “This is a pace of about 6 percent a year,” he said. This policy keeps China’s exports cheap and makes American exports higher when compared.
In his “fundamental propositions,” Geithner acknowledged that “the United States is on track to export more than $100 billion of goods and services to China this year…these exports are supporting hundreds of thousands of jobs across the nation in all sectors.”
The statistic barely sheds light on how fundamental it is to sway China to “a more open, market oriented economy” and the changes needed to China’s “exchange rate and treatment of intellectual property,” the latter of Geithner’s propositions.
“China of course presents enormous economic opportunities for the United States and for the world,” Geithner said, but its size, the speed of its ascent, and its policies are a growing source of concern both here and in countries around the world.”
Geithner’s two main objectives on China:
- “Expand opportunities for U.S. companies to export and sell to the Chinese market”
- “To promote reforms that will reduce China’s reliance on export led growth and encourages a shift to domestic consumption and investment…China is now too large relative to the world economy for it to continue to rely on foreign demand to grow.”
The concerns:
- China’s economy and financial system “are still dominated by the government…government domination limits competitiveness within the Chinese economy and prevents the private sector from contributing to growth at its full potential.”
- To enact and enforce polices that prevent the “theft of intellectual property” and a commitment to “not discriminate against U.S. companies that operate in China.”
- China’s close management of its exchange rate which “restricts the ability of capital to move in and out of the country”. These polices have kept “the Chinese currency substantially undervalued, which gives Chinese companies the competitive advantage.”
By learning from America’s mistakes, Geithner and the U.S. are promising help to China by preventing hyperinflation or a recession in the Chinese economy. Any deal would potentially benefit the current depressed U.S. economy, too.
Geither said that China will have it’s own agenda in the near future. He predicts the country’s objectives will be to get “more access to U.S. high technology products”, “take greater advantage of investment opportunities in the United States,” and “to be accorded the same terms of access that market economies enjoy.”
Thomas Donahue, president and CEO of the U.S. Chamber of Commerce predict Tuesday that Hu will make an announcement next week during his visit to the U.S. Donahue said that when a friend comes to visit, they usually come bearing gifts, referencing the Chinese president’s visit and its currency.
President Barack Obama is Forbes’ second-most powerful person, according to its November 2010 list of the “World’s Most Powerful People,” and Hu holds the No. 1 spot on that list. So next week, at least according to Forbes, the two most-powerful in the world will be in Washington.
