From Overseas Press

China, US look to close world's biggest trade gap

Updated: 2010-05-24 10:09
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The world's largest bilateral trade gap--and how to narrow it--will be the focus of high-level China-US talks in Beijing this week, with export barriers taking centre stage and the yuan lurking on the side.

China's whopping trade surplus with the United States has narrowed over the past year as the global financial crisis has decimated American demand.

At their Strategic and Economic Dialogue this week, Washington and Beijing will look for ways to balance their $400 billion trade ties on a more permanent basis, steering clear of an open clash about the yuan's peg to the dollar.

The stakes are high for both.

As he tries to reinvigorate the US economy, President Barack Obama has set a goal of doubling exports in five years, which can be met only with a big increase in sales to China.

For Chinese leaders, the task is to show that trade flows are headed in the right direction without fundamental change to the country's exchange rate regime, declawing critics who have called for punitive action if it does nothing.

The United States has said a top concern at the talks will be Chinese industrial policies promoting "indigenous innovation" that are seen as restrictive and have alarmed foreign companies.

The US Treasury's senior coordinator for China affairs, David Loevinger, said last week that increasing exports meant not only fighting trade barriers but also "ensuring that large economies like China with large current account surpluses depend more on their own domestic demand for growth".

Last year, despite the global recession, the US trade deficit with China was $227 billion, the largest for any country. Beijing knows the road to Obama's export target runs through China.

"Where are those goods going to go? The Chinese market is huge and it has money in its hands," said Zhou Shijian, with the Center for US-China Relations at Tsinghua University.

That feeds into one of the main messages that Zhou said Chinese officials will not tire of repeating this week. If the United States wants to sell more to China, it should loosen its controls over the exports of high-tech products.

US Treasury Secretary Timothy Geithner and Chinese Vice Premier Wang Qishan will lead the economic talks on Monday and Tuesday, with top trade representatives and hundreds of senior officials from both countries also at the meetings.

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