China and the United States pledged on Friday to boost efforts to tackle the turmoil engulfing global markets and to continue high-level cooperation when President-elect Barack Obama takes office.
But signs of tension marked the two days of talks as the United States fretted that China might be losing the stomach to let its currency keep rising in value and China voiced concern about Washington's management of the world's largest economy — in which China has a huge financial stake.
In a closing statement, U.S. Treasury Secretary Henry Paulson described the fifth round of the cabinet-level Strategic Economic Dialogue as "robust" and characterised by "straightforward back-and-forth" exchanges.
Assistant Chinese Finance Minister Zhu Guangyao, asked whether Beijing would keep buying U.S. debt, responded by urging Washington to take measures to protect China's financial interests.
"We hope the U.S. side will seriously consider the Chinese side's concern and protect the interests of Chinese investors," Zhu told a news conference.
His remarks echoed those a day earlier of Vice-Premier Wang Qishan, who led the Chinese delegation to the talks.
There is long-standing concern in Beijing about Washington's stewardship of the dollar, resentment at the pressure the United States applies over the yuan and a constant debate over whether China should add to its U.S. debt holdings.
Beijing holds more than 60 percent of its $2 trillion of reserves in dollar assets, with a big chunk in debt issued by the Treasury and troubled mortgage lenders Fannie Mae and Freddie Mac, which have effectively been taken over by the government.
CURRENCY STRAINS
Friction over exchange rate policy was close to the surface of the talks after China's central bank startled markets this week by letting the yuan, also known as the renminbi (RMB), fall modestly against the dollar after engineering a steady 20.3 percent rise since July 2005.
Some economists read the central bank's action as a warning to Washington — and to the Obama administration in particular — not to press Beijing too hard on currency policy given the dire straits of many Chinese exporters.
But Paulson stood his ground, singling out the importance of a market-driven currency in promoting domestic demand-led growth in China that would contribute to a healthy global economy.
"While recognising that currency movements will be uneven over shorter periods, the United States encouraged China to continue, and accelerate, RMB appreciation and flexibility," a fact sheet issued after the talks added.
Zhu, the assistant finance minister, reaffirmed China's long-standing policy of gradual currency reform to keep the yuan's exchange rate basically stable.
But a fact sheet issued by the Chinese government made no reference to the yuan.
TRADE FINANCE
Wang, the vice-premier, repeated a message he delivered at the start of the talks that the current priority for policy makers must be to restore market confidence to avert recession.
He said China was looking forward to candid discussions with the Obama administration under the umbrella of the twice-a-year Strategic Economic Dialogue.
"Both sides think highly of the important role of the SED mechanism and its achievements. We both agreed that we should continue to enhance dialogue in the new circumstances," he said.
Among the concrete results of the meeting, the two governments agreed to make an additional $20 billion available through their export-import banks to help finance the export of more U.S. and Chinese goods.
Current financial stresses were making it difficult for emerging market economies in particular to secure trade finance, the U.S. fact sheet said.
And in an initiative to help foreign banks in China that find themselves strapped for cash due to the credit crunch, Beijing agreed to temporarily waive limits on how much foreign banks can borrow from abroad.
"This action helps maintain investor and depositor confidence so that U.S. banks can continue to grow their business in China," the U.S. government said.
