U.S., China pledge to work on reducing trade gap, but make little progress on currency

Friday, December 15th 2006, 6:07 am

By: News On 6

BEIJING (AP) _ U.S. and Chinese officials pledged Friday to work on reducing China's swollen trade surplus, but ended two days of closely watched talks with little progress on currency and other disputes that are straining ties.

U.S. Treasury Secretary Henry Paulson said China would pursue currency flexibility, long-sought by Washington. But he seemingly came away with little more than Beijing's standard statement that it will relax currency controls and enact market-opening reforms at its own pace.

U.S. Federal Reserve Chairman Ben Bernanke, a member of Paulson's high-profile delegation, also urged Beijing to take faster action on its currency. He said a stronger yuan would boost living standards and help ordinary Chinese as well as promoting global economic stability.

The two sides promised to launch discussions on opening China's service industries wider to foreign competition and on cooperating in environmental protection and developing cleaner energy sources.

The talks were billed as the start of a long-term ``strategic economic dialogue'' created in August by U.S. President Bush and his Chinese counterpart, Hu Jintao, in hopes of easing irritants that might derail one of the world's biggest trade relationships.

``We agree on the need for balanced, sustainable growth in China without large trade imbalances,'' Paulson said at a news conference before flying back to Washington.

But he acknowledged the two sides need shorter-term ``tangible successes along the way'' to sustain support for free trade. He said he could only speculate on whether this week's outcome would satisfy U.S. critics who want tough action against Beijing.

``I can only say I am very pleased with what we have accomplished, because we've got some immediate tangible results, some that are symbolic but I think symbolically important,'' he said.

At a briefing earlier with reporters, Paulson and his Chinese counterpart, Vice Premier Wu Yi, said the wide-ranging talks laid the foundation for progress in future trade meetings. In a reflection of the amicable atmosphere, the pair held hands as they arrived at the event in the Great Hall of the People.

``This dialogue has helped both of us to build mutual understanding and enhanced trust,'' Wu said.

Bush's government faces growing pressure from American business groups and Democrats in Congress for action as trade deficits with China mount steadily, reaching $24.4 billion in November. The annual U.S. deficit is in line to top last year's record $202 billion level.

Critics say Beijing keeps the yuan undervalued, giving its exporters an unfair price advantage and hurting foreign companies.

In a possibly discouraging sign for Americans hoping for faster action on trade, Wu indicated that Beijing views the talks as a way to make clear to Washington the constraints that it faces.

Wu's opening statement Thursday included a lengthy account of China's widespread poverty and history of colonial domination.

``It is our hope that by making an introduction on China's development road and economic strategy for our American friends (we can show) why we have chosen this development road and where it will lead us in the future,'' she said.

In a speech at an official research organization, Bernanke urged the Chinese government to allow a more flexible exchange rate, saying a stronger yuan would boost the buying power of ordinary families and bring stability by encouraging domestic consumption to balance surging exports.

``More flexibility in the RMB would have important advantages for China,'' the Fed chairman said, referring to the yuan by one of its names, the renminbi, or people's money.

Paulson's delegation also included four other Cabinet secretaries _ Commerce Secretary Carlos Gutierrez, Energy Secretary Samuel Bodman, Health and Human Services Secretary Mike Leavitt and Labor Secretary Elaine Chao. U.S. Trade Representative Susan Schwab and the head of the Environmental Protection Agency, Stephen Johnson, also were on the trip, along with other Cabinet officials.

Bodman said China agreed to join the FutureGen project, meant to create a low-emissions coal-fired power plant. He said the two sides would hold discuss other possible cooperation in energy and conservation.

The two sides agreed to hold the second round of meetings next May in Washington.

Also Friday, Chinese Finance Minister Jin Renqing said Beijing agreed to allow the Nasdaq Stock Market and New York Stock Exchange to open formal business offices in China.

Jin did not give a timetable or other details. Dozens of Chinese companies have listed shares on Nasdaq and the New York Stock Exchange, and both are eager for more business as China's economy booms.

The Nasdaq Stock Market Inc. has a representative office in Beijing, but such status restricts the scope of its activities, barring it from signing contracts. The parent of the New York Stock Exchange is the NYSE Group Inc.