Dialogue seeks to reach consensus

(China Daily)
Updated: 2010-05-25 11:24
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Dialogue seeks to reach consensus

Lei Yanhua, researcher at the Chinese Academy of International Trade and Economic Cooperation under Ministry of Commerce 

Short-term and specific solutions will help solve the long-term and strategic issues. At the first round of S&ED, China and the US reached a consensus on macroeconomic policy coordination, economic structure adjustment, financial system reform, trade and investment open policy, international financial institutions reform and cooperation on energy and environmental protection.

The current round of S&ED will focus on similar topics, although the specific content will be different from the last round of the talks.

In the current round of talks, the possibility is slim that the two sides reach a consensus on the exchange rate issue, and if the US insists on its standpoint, it will be more difficult for them find a solution on this issue. China thinks that US statistics have aggrandized China's trade surplus and believes the surplus is partly because of the international transfer of industry. Moreover, the US control to high-tech export to China has significantly worsened the imbalance in Sino-US trade.

The US trade deficit is rooted in the fundamentals of the US economy but a trade deficit doesn't mean its overall interests are jeopardized. The revaluation of the yuan is not the key to solving imbalance in Sino-US trade.

China has found the solution to the structural imbalance of the global economy: changing economic development mode. But the solution currently is mainly used as a domestic policy rather than proposed as a remedy to international economic imbalances.

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In 2007, China began to boost domestic demand and change its economic development mode. Since the beginning of this year, the central government has been accelerating its move in this direction.

One core method of doing so is to modify the demand structure, increasing domestic demand and decreasing the dependence on foreign markets. Changing the development mode is a much better way forward than revaluing the yuan.

China should persuade other countries that changing the economic development mode is the best solution and revaluing the yuan would decrease China's export competitiveness. That would ultimately offset the country's efforts to increase domestic demand, a crucial step in helping to rebalance the global economy.

The unreasonable control imposed by the US on the export of high-tech products to China has affected US corporate interest. For example, in 2007, China's carbon fiber production ability was very limited and it needed to import equipment from the US. It couldn't because the US control prevented US carbon fiber enterprises from sharing this opportunity with China.