Chinese Vice-Premier Wang Qishan warned on Monday the global economy is in a grim state and the visiting U.S. commerce secretary said China would spend $1.7 trln on strategic sectors as Beijing seeks to bolster waning growth.
Wang said an "unbalanced recovery" may be the best option to deal with what he had described on Saturday as a certain chronic global recession, suggesting Beijing would bolster its own economy before it worries about global imbalances at the heart of trade tensions with Washington.
"An unbalanced recovery would be better than a balanced recession," he said at the annual U.S.-China Joint Commission on Commerce and Trade, or JCCT, in the southwest Chinese city of Chengdu.
The comments, echoed by Vice Finance Minister Zhu Guangyao, stopped short of suggesting China would try to boost exports as it had done during the 2008-2009 global financial crisis when it pegged the yuan to the dollar.
Instead, U.S. Commerce Secretary John Bryson told reporters that China had confirmed to U.S. officials that it planned to spend $1.7 trln on strategic sectors in the next five years.
Beijing has previously said these sectors include alternative energy, biotechnology and advanced equipment manufacturing, underlining its aim to shift the growth engine of the world's No. 2 economy to cleaner and high-tech sectors.
The investment amount of 10 trln yuan ($1.7 trln) is more than two times bigger than the eye-popping 4 trln yuan stimulus package launched during the global financial crisis, plans first reported by Reuters a year ago.
"As major world economies, China and the United States would make a positive contribution to the world through their own steady development," Wang told trade, investment, energy and agricultural officials.
ALARM OVER RISKS
Policymakers globally have voiced alarm over economic risks, which mainly stem from the euro zone debt crisis.
Monday, Singapore and Thailand said their economies would shrink in the fourth quarter and Japan posted a bigger than expected fall in October exports. Some central banks, including those in Brazil and Indonesia, have cut interest rates.
China's growth slowed to 9.1% in the third quarter from 9.5% in the second-quarter and 9.7% in the first quarter, but the rate remains in Beijing's comfort zone.
After tightening monetary policy to fight the threat of inflation, the central bank has since loosened its grip on bank credit in a bid to support cash-starved small firms and pledged to fine-tune policy if needed as economic growth slowed down.
ON TRADE, FRICTION AND PROGRESS
U.S. officials said the discussions yielded progress on the question of forced technology transfers to Chinese companies, long a sore point for U.S. businesses, and on other trade irritants involving software, beef and cars.
In particular, China committed not to require foreign automakers to hand their new energy vehicle technology over to Chinese partners, or to establish Chinese brands as a condition for market access, said U.S. Trade Representative Ron Kirk.
Robert Holleyman, president of the Business Software Alliance, said in Washington he was he was encouraged by a renewed Chinese commitment to ensure government agencies and state-owned companies are using only legal software.
Although the JCCT talks do not address exchange rate policies, U.S. officials at the talks warned Wang and his colleagues that they could not ignore rising American impatience with China's trade policies and investment barriers.
U.S. gripes about China's trade-boosting policies spilled into President Barack Obama's meeting with Chinese Premier Wen Jiabao on Saturday in Bali, when Obama raised China's exchange rate policies, which many in Washington say keep the yuan cheap against the dollar in order to help Chinese exports.
However, Zhong Wei, an influential economist at Beijing Normal University, said the benefits to the United States of yuan appreciation "are nearly zero."
"Cheap Chinese goods have been a subsidy for the poor in the U.S., and now the U.S. government wants to eliminate such subsidy while it's having difficulty creating jobs," he said.
At the heart of the trade friction between the two countries is a U.S. trade deficit with China that swelled in 2010 to a record $273.1 bln from about $226.9 bln in 2009.
