Once the cameras stopped rolling at the opening session of the U.S.-China Strategic and Economic Dialogue, top officials got down to brass tacks in what one called "very constructive, very candid" discussions.
Trying to pull themselves out of the worldwide financial crisis, the United States and China both enacted massive stimulus programs. Now they must decide how — and when — to phase out those programs without damaging their economies. “The U.S. and China, in some ways, have acted more like each other than many of the other major economies,” David Loevinger, the U.S. Treasury Department’s senior coordinator for China, told reporters. Both countries put in place “very aggressive fiscal and monetary stimulus policies,” he said. Those policies are starting to take effect, but “both sides are grappling with the timing of the withdrawal of their macroeconomic stimulus,” he said. “I think there was general agreement that it’s very important that this doesn’t occur too soon,” Loevinger said, “because the recoveries are still very fragile, but also an acknowledgment that they have to take place at the right time and not let another set of imbalances and bubbles build up in the economy.” A major danger in both countries is inflation. Economists said China is worried about the soaring U.S. fiscal deficit and any attempt by the United States to “inflate” its way out of the crisis. Such a move would hurt the value of Chinese investments in U.S. Treasury bonds.
U.S., China launch ‘new dialogue’
At this meeting, American officials said they, in turn, are warning China that the U.S. economy has fundamentally changed in response to the crisis. Americans are saving more and buying less. “The Chinese economy needs to adjust to that and promote homegrown growth … led by [Chinese] household consumption,” Loevinger said. “If China’s going to grow, it’s not going to be able to grow by exporting to the U.S., and as far as we can tell, to the rest of the world.” The two-day Strategic and Economic Dialogue concludes Tuesday afternoon. On tap for Tuesday’s discussion are trade and investment policies. At the meeting’s conclusion, the two countries will release what they’re calling a “joint fact sheet,” laying out a plan to define what issues these two giant economies will be focusing on together over the next several years.