Assertive China calls for change in export, investment rules at start of talks with US

By Joe Mcdonald, AP
Monday, May 24, 2010

China taking tough line as dialogue with US begins

BEIJING — China showed its growing assertiveness Monday as it launched high-level talks with Washington, saying it will carry out currency reform at its own pace and calling for an end to U.S. curbs on high-tech exports.

Beijing also called on Washington to simplify foreign investment rules that it says are hampering Chinese companies and defended a policy to promote domestic technology that its trading partners say might hurt foreign companies.

At an opening ceremony for the strategic talks, President Hu Jintao promised changes in exchange rate controls that Washington and others say keep China’s yuan undervalued and distort trade. But he gave no indication when it might happen.

“China will continue to steadily advance the reform of the formation of the renminbi exchange rate mechanism under the principle of independent decision-making, controllability and gradual progress,” Hu said at the Great Hall of the People. U.S. Secretary of State Hillary Rodham Clinton and Treasury Secretary Timothy Geithner sat onstage behind him.

U.S. and Chinese officials stressed their wide-ranging common interests and pledged closer cooperation on trade, financial regulation, climate and piracy. They called for more student exchanges and other efforts to promote “people to people” ties.

The gathering brings together dozens of Cabinet officials from both sides, the chiefs of both central banks and military officers. It is the second round of strategic talks, termed the Strategic and Economic Dialogue, that began last year in Washington.

“Our common challenge is to make sure that as the global economy recovers from the crisis, we are laying the foundation for strong, sustainable and balanced growth,” Geithner said at a meeting on economics.

Monday’s meetings focused on economic strategies and included discussion of the European debt crisis, officials said.

The talks were overshadowed by South Korea’s announcement that it was cutting off trade with North Korea and would take its neighbor to the U.N. Security Council over a torpedo attack that killed 46 sailors.

In currency, Beijing faces demands by some American lawmakers for trade sanctions if it fails to act. President Barack Obama vowed in February to get tough on currency but has been more conciliatory lately, possibly hoping Chinese leaders will act if they do not appear to be giving in to pressure.

The yuan has been frozen against the dollar since late 2008 to help China’s exporters compete abroad. Analysts expected Beijing to let the currency rise this year to ease strains in its fast-growing economy but say that might have been postponed due to the European debt crisis. Because the yuan is pegged to the dollar, the Chinese currency is also gaining against the euro. A move by China to let the yuan rise further amid that situation could have an even more harmful effect on the country’s exporters.

Beijing used the meeting to press its interests in a range of issues from technology to Taiwan. Its stance reflected China’s rising status as the world’s third-largest economy and the communist government’s growing confidence following its quick rebound from the global downturn.

Chinese officials called for an end to U.S. export controls meant to keep “dual use” technologies with possible weapons applications, such as lasers and supercomputers, out of the hands of China’s military. Washington is reviewing its controls and says it might make changes.

“We hope the actions will be big, not small — not removing several items from the control list but improving the regime overall, and also a change in the practice of singling out China and treating China unfairly,” China’s Commerce Minister Chen Deming said at a news conference.

Highlighting China’s status as a rising global investor, Chen also complained that U.S. strictures on investment by foreign entities with government ties are vague and are obstacles to Chinese companies.

“We hope the United States can have a more transparent and predictable environment,” Chen said.

On technology, a Chinese official also rejected U.S. pressure over Beijing’s “indigenous innovation” policy. Business groups worry the policy, meant to nurture technology development by giving domestic creators special status in government procurement and other areas, is a threat to market access for foreign companies, and Geithner said American officials would press the complaint at the talks.

Cao Jianling, a deputy science minister, said Beijing was overhauling the policy to treat foreign-owned companies in China equally with local rivals but was going ahead with plans to favor those with research efforts in this country.

“China’s policy of insisting on reform and opening up and encouraging foreign companies to do research and development in China will remain unchanged,” Cao told reporters.

At the opening ceremony, Hu gave a hint of the resistance American officials might face if they raise Taiwan or Tibet. He referred twice to China’s “core interests,” a phrase coined by Beijing to emphasize the importance of its claims to sovereignty over Tibet, self-ruled Taiwan and vast, disputed swathes of the South China Sea.

“We should respect each other’s core interests,” Hu said. “To the Chinese people, nothing is more important than safeguarding national sovereignty and territorial integrity.”

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