JOINT STATEMENT
17TH SESSION OF THE CHINA-US JOINT ECONOMIC COMMITTEE
Beijing, China, October 16-17, 2005
At the invitation of Chinese Finance Minister Jin Renqing, US Treasury Secretary John W. Snow led an official delegation to China to co-chair the 17th Session of the China-US Joint Economic Committee (JEC) on October 16-17, 2005. People's Bank of China Governor Zhou Xiaochuan, China Banking Regulatory Commission Chairman Liu Mingkang, China Securities Regulatory Commission Chairman Shang Fulin, NDRC Vice Chairman Zhu Zhixin, Ministry of Finance Vice Minister Li Yong, Ministry of Commerce Vice Minister Ma Xiuhong, People's Bank of China Deputy Governor Hu Xiaolian, China Insurance Regulatory Commission Vice Chairman Li Kemu, State Administration of Foreign Exchanges Deputy Chief Wei Benhua, US Federal Reserve Chairman Alan Greenspan, US Securities and Exchange Commission Chairman Christopher Cox, US Commodities Futures Trading Commission Chairman Reuben Jeffrey, US Treasury Under Secretary Timothy D. Adams, and US Ambassador Clark T. Randt, Jr. also participated in the meeting. Both sides noted the important role the JEC has played in strengthening bilateral economic and financial cooperation, maintaining domestic and global economic stability and prosperity, and promoting bilateral relationship development in general.
Macroeconomic Issues: Addressing Global Economic Imbalances
The two sides discussed the situation and outlook in their respective economies, as well as the challenges facing the global economy. Global economic performance remains sound, notwithstanding the impact of rising oil prices. Inflation and inflationary pressure are relatively contained. The Chinese side explained that the China's economic developments remained stable and rapid. The US side noted that economic conditions in the US remain solid. However, both sides noted potential risks associated with high oil prices, tightening of financial market conditions, widened global current account imbalances and rising protectionism.
Global Imbalances
In discussing the situation and outlook for the global economy, the two sides noted that economic growth had not taken place evenly across the world, and that it was necessary to address current account imbalances that have arisen in order to sustain global growth. They acknowledged that they have a shared responsibility, along with other major economies, to implement the policies necessary to reduce these imbalances. The US side affirmed its commitment to reduce its fiscal deficit in order to increase domestic savings. Though Federal outlays for the hurricane relief and recovery efforts are likely to raise the budget deficit in the short term, the deficit outlook over the medium to long range is for steady declines due to tight controls on discretionary spending and continued strong economic growth. The Chinese side reiterated its commitment to undertake policies that would lead to sustained, rapid and more balanced growth of its domestic economy. In this context, the Chinese side affirmed their intention to make efforts on narrowing the gap between savings and investment, particularly by encouraging consumption. They also affirmed their intention to enhance the flexibility and strengthen the role of market forces in their managed floating exchange rate regime. Both sides agreed that exchanged rate policy is a sovereign decision, but can have a global impact. Both sides reaffirmed that excess volatility and disorderly movements in exchange rates are undesirable for economic growth.
Financial Sector Reform
1. China's Financial Sector Modernization.
The Chinese side stressed the importance of financial sector reforms in promoting economic growth. Chinese participants described measures being taken to strengthen the banking system and to develop its domestic capital markets, including restructuring of state-owned commercial banks and securities companies, resolving the problem of non-tradable shares in the stock market, strengthening financial market supervision, and further liberalization of financial services. The Chinese side reaffirmed China's commitment to further advance reform in the financial sector by opening up the financing sector to competition, strengthening prudential supervision and risk management, improving corporate governance and continued progress in corporatization and listing state-owned enterprises. The two sides discussed the benefits of financial sector development on increasing consumption and helping to reduce external imbalances. The two sides agreed to enhance the cooperation in financing sector reform and supervision.
2. US Financial Sector Issues.
The US side pointed out that US financial sector remained resilient. US banks all well-capitalized, and non-performing loan ratios remain low. The US side also discussed trends in the US housing and mortgage markets, recent modifications to plan for implementing the new Basel capital framework, and policy issues associated with foreign banks establishing a presence in the US market. There were also discussions of US efforts to restore investor confidence in the wake of recent corporate scandals, including implementation of the Sarbanes-Oxley Act. The Act strengthened regulation in such areas as corporate governance, disclosure, and accountability of top executives and other gatekeepers.
Cooperation in International Affairs
Both sides welcomed the strategic review and the reform agenda of the Bretton Woods Institutions. They agreed that governance of the IMF should evolve along with the world economy so that countries' position better reflect their global weights and all members are more effectively represented.
The two sides discussed US voting policies on MDB loans to China. China expressed its view that the United States should support the full range of Chinese MDB projects. The Chinese side expressed its intention to join the Inter-American Development Bank (IADB). The US side welcomed China's willingness to make a greater contribution to the cause of poverty reduction in Latin America and the world at large. The US side supported China's endeavor to join the IADB. Bilateral consultations on this matter will continue.
China and the United States reiterated the importance of actions to identify and combat terrorist financing and money laundering, and agreed to take necessary steps to prevent abuse of financial systems within their jurisdictions. China affirmed its willingness to join the anti-money laundering and anti-terrorist financing regional bodies, and to take the necessary steps to obtain full membership in the Financial Action Task Force (FATF). The United States supports China's involvement in anti-money laundering and anti-terrorist financing activities, and its efforts to obtain full membership in the FATF, by taking necessary steps to comply with FATF international standards.
The two sides reiterated their support for the successful conclusion of the WTO Doha Development Round negotiations. Both sides agreed to make effort to promote meaningful and balanced outcomes in key areas, including agricultural and financial services negotiations, and called for progress at the upcoming Hong Kong Ministerial Conference.
The Chinese delegation to the JEC consisted of representatives from the Ministry of Finance (MOF), People's Bank of China (PBC), Ministry of Foreign Affairs, National Development and Reform Commission (NDRC), Ministry of Commerce (MOFCOM), China Banking Regulatory Commission (CBRC), China Securities Regulatory Commission (CSRC), China Insurance Regulatory Commission (CIRC) and State Administration of Foreign Exchanges (SAFE).
The US delegation included representatives from the Treasury, Federal Reserve Board, Securities and Exchange Commission (SEC), Commodity Futures Trading Commission (CFTC), Federal Deposit Insurance Corporation (FDIC), National Association of Insurance Commissioners (NAIC), Council of Economic Advisers (CEA), and the US Embassy in Beijing.
(Xinhua News Agency October 18, 2005)
