Treasury: China must boost domestic demand

AP News
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Posted: Nov 10, 2009 9:52 AM

China must continue to work to boost domestic demand to avoid global imbalances in the flows of trade and investments between nations, a senior U.S. Treasury official said Tuesday.

World Bank chief economist Justin Yifu Lin on Monday said China should not be forced to let its currency appreciate as a way to rebalance the world economy. That runs counter to the views of the Obama administration.

The Treasury official said he had not had a chance to read the remarks of Lin, the first Chinese national to serve as chief economist at the World Bank. But the U.S. official said the administration did not see the remarks as a shift from the official Chinese government position that it plans to introduce policies that will allow its currency to gradually rise in value against the dollar. That move is seen as critical by many to lower the huge trade deficits the U.S. runs with China.

Treasury Secretary Timothy Geithner is in Japan and Singapore this week for meetings with the new government of Japanese Prime Minister Yukio Hatoyama and for the annual meeting of finance ministers of Asian nations.

The Obama administration has taken a less confrontational approach than the George W. Bush administration on the currency issue, choosing to emphasize the need for all countries to pursue policies that will rebalance global growth and guard against the dangerous imbalances that contributed to the global recession.

President Barack Obama, who leaves Thursday for his first trip as president to Asia, was successful in getting the Group of 20 nations at a meeting in Pittsburgh in September to agree to pursue policies to deal with global imbalances. Those imbalances include America's huge trade and budget deficits and large trade surpluses in such nations as China and Japan.

The Treasury official, who spoke on condition of anonymity because he was making his comments before the meetings, said Geithner would stress the goals of the G-20 leaders for the need to pursue balanced global growth. Geithner will meet with Hatoyama and other officials of the Japanese government on Wednesday.

The official also said that would be Geithner's message during discussions Thursday among finance ministers of the Asia Pacific Economic Cooperation forum in Singapore.

Obama is scheduled to arrive in Tokyo on Friday, his first stop on a weeklong Asian trip that will also include participating in the APEC summit in Singapore and visiting China and South Korea.