Bloomberg News

Xi Stresses Positive U.S. Ties in Lew Meeting Amid Tensions

March 19, 2013

U.S. Treasury Secretary Jacob Lew

Jacob Lew, U.S. treasury secretary. Photographer: Andrew Harrer/Bloomberg

Chinese President Xi Jinping stressed positive ties with the U.S. in his first meeting with a foreign official since taking the post amid tensions between the world’s two biggest economies over espionage and exchange rates.

The nations’ economies have a “seamless connection” and their relationship is of “great importance,” Xi, in his sixth day as president, said during a meeting with U.S. Treasury Secretary Jacob J. Lew at the Great Hall of the People in Beijing. Lew, in his first trip since taking office Feb. 28, said they had a “special responsibility” for strong global growth, before reporters were ushered out of the room.

The session with Xi began two days of talks for Lew on topics ranging from the nations’ half-trillion dollars in annual trade to accusations that the yuan is undervalued and that China engages in online spying. New Premier Li Keqiang, who will meet with Lew tomorrow, said this week that the country opposes hacking and is a victim of attacks.

“Maintaining a healthy relationship with China is an important task for Mr. Lew,” said Eswar Prasad, a former International Monetary Fund official who is now a professor at Cornell University in Ithaca, New York. “The U.S. administration recognizes the need to engage with China in a more constructive fashion so that a variety of contentious issues can be dealt with frontally rather than becoming roadblocks to a smoother relationship.”

Exchange Rate

Lew raised the exchange rate, intellectual property, cybersecurity and North Korea during the 45-minute meeting, according to a U.S. official who asked not to be identified. The two also discussed the global economy including Cyprus, according to the official, after a decision by euro-area finance ministers to tax bank deposits in the island nation threatened to revive debt turmoil in the region.

Lew was scheduled to meet today with Xu Shaoshi, head of the National Development and Reform Commission, and Finance Minister Lou Jiwei, according to the U.S. Li will meet with Lew tomorrow, said Lou Danzhu, an official with China’s Ministry of Foreign Affairs. Xi and Li were named to the two top posts last week, completing a once-a-decade power handover within the Communist Party.

Xi, 59, succeeded Hu Jintao as party chief in November and replaced him as president on March 14. The next day, Li, 57, became head of government as premier, following his appointment as the party’s No. 2 official in November.

Growth Opportunities

Lew, 57, will discuss “opportunities for cooperation and growth” and “efforts to level the playing field and create new opportunities for U.S. workers and businesses,” the Treasury Department said March 17 in an e-mailed statement.

“The fact that Lew chose China as his first foreign visit and that he will be the new Chinese economic team’s first foreign visitor highlights how important each country has become to the other’s economic agenda,” said David Loevinger, a former senior coordinator for China affairs at the U.S. Treasury Department, now an analyst in Los Angeles at TCW Group Inc.

China needs to make more progress on the yuan, a senior U.S. administration official said March 15. Lew, who succeeded Timothy F. Geithner, will also discuss cybersecurity with Chinese officials, the official said.

Cybersecurity has vaulted to the top of the U.S. agenda as President Barack Obama seeks to curb attacks on corporate networks that U.S. intelligence agencies and security firms such as Mandiant Corp. have traced to China. Obama told Xi in a call last week that the issue will be a key part of bilateral talks.

Hacking Victim

Hacking is a “worldwide problem and in fact China itself is a main victim of such attacks,” Li said March 17 at his first press briefing since his appointment by the National People’s Congress. “China does not support -- in fact it is opposed to -- hacking attacks.”

China is the biggest foreign owner of U.S. Treasuries, with $1.26 trillion in holdings as of January, according to Treasury figures. China is the biggest trading partner for the U.S. behind Canada, with two-way trade last year reaching $536.2 billion, and the deficit on the U.S. side at $315 billion in 2012, more than any other nation.

Li also said March 17 that China’s new government will, as in the past, “attach great importance to our relationship with the U.S., a relationship between the world’s largest developed country and the world’s largest developing country.”

Members of Congress have called for China to let its currency strengthen further, saying that the yuan is undervalued, making U.S. exports too expensive and Chinese imports too cheap. Lew told U.S. lawmakers earlier this year that addressing China’s exchange rate would be a “top priority.”

After keeping the yuan stable for a decade, China allowed its currency to strengthen 21 percent from July 2005 to July 2008. Appreciation was then halted for almost two years to help exporters weather a global recession and the currency has advanced about 10 percent against the dollar since controls were loosened in June 2010. China has repeatedly said that the yuan is close to an equilibrium level.

To contact Bloomberg News staff for this story: Michael Forsythe in Beijing at mforsythe@bloomberg.net; Kasia Klimasinska in Beijing at kklimasinska@bloomberg.net.

To contact the editor responsible for this story: Peter Hirschberg at phirschberg@bloomberg.net


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