Geithner's First Trip to China

Posted by: Steve LeVine on May 28

Treasury Secretary Tim Geithner will have much occasion to hear and offer up opinions on one of the most burning questions in U.S.-China relations – how far and how fast Beijing intends to take its apparent strategy for increasing the use of its currency abroad.

Geithner travels to China for the first time this weekend. He’s scheduled to visit with a string of Beijing leaders, including President Hu Jintao. As a reality check for the significance of this reception, imagine that Wang Quishan visited Washington next week. Wang, who as China’s vice premier is Geithner’s counterpart, would certainly see Geithner, and doubtlessly Larry Summers, head of President Barack Obama’s National Economic Council. But would he get a meeting with Vice President Joe Biden? How about Obama himself? Probably not. Yet in addition to Hu and Wang, Geithner is scheduled to meet with Chinese Premier Wen Jiabao.

The Chinese will have to explain why they are so interested in Geithner. But an interesting subtext is that it is Geithner who delivered the administration’s most stinging, high-level remark aimed at China. In his Senate confirmation hearing in January, Geithner said in reply to a written question that China is deliberately suppressing the value of the renminbi, the country’s currency. Geithner’s staff later said the reply was a mistake, yet it attracted much attention, and he had much explaining to do for weeks after – China is by far the largest international holder of U.S. debt, and may be relied on to finance much of Washington’s deficit for years to come.

My Beijing colleague Dexter Roberts and I wrote this week about China’s concern about the value of the dollar because of Washington’s deficit spending, and its moves to widen the renminbi’s circulation.

In a briefing to reporters today, a senior Treasury official said that Geithner is “fully prepared to discuss” the topic of the U.S. deficit with Chinese officials. "The Obama administration believes very strongly in fiscal discipline and has put in place a plan to assure sustainable debt levels in the future, to reduce the budget deficit to levels that assure that," the official said.

Regarding his own agenda, Geithner will push Beijing to continue to build up domestic demand so that China’s economy is less reliant on exports, the official said. That way China will rely less on high U.S. demand for Chinese goods, U.S. officials say.

Geithner is scheduled to return to Washington on June 3.

Update: In BW's Eye on Asia blog, Roberts -- Beijing bureau chief-- writes that the Geithner trip will have some tension.