 TREASURY NEWS
FROM THE OFFICE OF PUBLIC AFFAIRS FOR IMMEDIATE RELEASE |
 Treasury Secretary Rubin meets with Finance Minister Xiang. |
Remarks for Opening Plenary
China - U.S. Joint Economic Committee - Eleventh Session
Mr. Minister, I would like to welcome you and your delegation to Washington for this eleventh meeting of the JEC. These meetings are important to enable us to better understand each others' views on a broad range of issues that reflect our mutual well-being. These give us a framework we can use to deal with issues as they come up -- like the Asian financial crisis. Meetings between us, the finance ministers of two of the world's largest economies, have become -- and should be -- regular events.
The months since the last meeting have been difficult. We came to that meeting from the IMF/World Bank Annual Meetings, where the Asian financial crisis was the major topic of discussion. But none of us could have predicted then how bad that crisis would become. The crisis underscores the importance of international cooperation and frequent consultation on economic issues. Both the United States and China have played important roles in helping to resolve the crisis, through provision of direct assistance, through cooperation in the Manila Framework and the Special Meeting, and through their participation in international financial institutions. China, by maintaining its exchange rate policy, has been an important island of stability in a turbulent region
The crisis also brings into focus the importance of some of the issues we are here to discuss today, for there are many lessons for us to apply to our own economies. The Chinese and U.S. economies have remained strong. But neither of us can take this success for granted. Rather, we should learn from the experience of the crisis countries, which have demonstrated to us the importance of sound macroeconomic policies, strong financial sectors, and transparency. We in the U.S. have worked hard to correct the balance of macroeconomic policies -- to the point where we expect a budget surplus in 1998, after a long string of deficits. We have also worked hard to strengthen our financial system, after learning a costly lesson in the savings and loan crisis of the 1980s.
China has made excellent progress in improving the management of its macroeconomic instruments, having ended the stop-and-go economic cycles of the early reform period and brought price stability along with a growth rate that is the envy of the world, despite its recent moderate decline. As a result of that growth, China has lifted tens of millions of people out of poverty. It is important that China build on that success to create a strong basis for sustainable growth in the years to come, rather than focus on growth in any particular year, particularly this one, in which the external environment is not so favorable.
To build this basis, your leaders have made a strong commitment to addressing some of China's structural challenges, in areas as diverse as banking, state-owned enterprises, and government restructuring. We look forward to hearing from you today about these initiatives.
One area in which we are particularly interested is reform of the financial sector. On the positive side, the financial sector plays a crucial role in mobilizing savings and allocating them efficiently. On the darker side, we have recently seen graphic demonstrations of the havoc that a weak and inadequately-supervised banking system can wreak. We have watched with interest the steps you have taken so far, but we want to understand them better. We have learned from our own S&L crisis the difficulty and expense of restructuring weak financial institutions, and of putting them on a sound basis for the future. We are interested not only in learning about the steps you plan to take, but also in exploring how we can work with you in addressing this problem, perhaps through sharing our expertise.
Closely tied to the issue of financial market reform is the larger issue of state-owned enterprise reform. Last year then-vice premier Zhu indicated that within three years the problems of state-owned enterprises would be addressed. This is an enormously challenging goal, and we are interested to learn about progress made so far, and about plans for the future. SOE reform necessarily involves redistribution of some of the social functions -- like pensions, housing, and healthcare -- that employers have historically provided. While we have never had such sweeping employer provision in the U.S., these are issues with which we, too, have wrestled. We recently overhauled our social welfare system, and are currently grappling with the possibility -- or necessity -- of reforming our state pension (social security) system.
The introduction of market forces over the last two decades, and the great strides you have already taken in restructuring and opening your economy, have made China one of the world's great trading nations, and one of the United States' most important trading partners. It has also created tensions, particularly relating to the size and growth of our bilateral trade deficit. Our presence here reflects the importance we attribute to China as an economic partner -- and the respect which we have for its economic accomplishments. This importance is one factor that led President Clinton to invite President Jiang to visit the U.S. last year, and that will bring President Clinton to Beijing next month.
There is no doubt that the current international climate is a difficult one. We want to discuss with you the outlooks for our economies in the areas of trade, the current account, investment, reserves, and the exchange rate.
China's leaders have reaffirmed their exchange rate policy, which we feel is appropriate in light of regional developments. While there is speculation in the press and the financial markets suggesting that China might benefit from a devaluation, we frankly do not see the basis for their arguments. We agree with your leaders' analysis that a devaluation would not be in China's best interests, that it might threaten trade and investment flows and could invite a return of inflation as well, of course, as having a major impact on the other currencies in the region, including that of Hong Kong.
We should also discuss ways in which we can move our relationship, and China's integration into the world economy, forward, particularly in light of President Clinton's upcoming visit. Economic issues will play a major role in the Summit between our Presidents, and it our job to contribute to significant achievements in this area. The core of this discussion must logically be China's WTO accession. When I was in China last year, I stated that China belongs in the WTO and that Chinese accession to the WTO is strongly in the United States' national interest, as well as that of China. This is still the case. Since last year's state visit, there has been encouraging progress on the issue, although much remains to be done. I hope that there will soon be significant additional progress, which we will be able to report to our presidents in China.
In this respect, I would particularly like to mention the issue of financial services, whose importance I alluded to already and which are the direct responsibility of the Treasury Department. We feel that international financial firms -- in banking, securities, and insurance -- have a great deal to offer the Chinese economy, both to its businesses and to modernizing its own financial sector. We hope that as part of the accession we will be able to craft an agreement that will allow these firms to supply the needs of Chinese customers, and at the same time provide safeguards to meet your concerns.
Finally, I would like to touch upon international law enforcement issues. As international integration has accelerated, so, unfortunately, has international crime. Such crime is a drag on all of our economies, and it is essential that we work together to fight it. I hope that we can agree that both sides should observe the terms of the Memorandum of Understanding and Statement of Cooperation on prison labor and that we will finally be able to complete the negotiations on a Customs Mutual Assistance Agreement. Other areas in which we can strengthen cooperation include combating international organized crime, narcotics trafficking, counterfeiting and money laundering through the JEC and other fora, including the recently-formed Joint Liaison Group for Law Enforcement.
In our discussions today, and in the future, we will no doubt discuss areas where we disagree, and perhaps even uncover new areas of disagreement. It would be disingenuous for us to gloss over our differences, or to pretend that they could all be eliminated. In any relationship of this importance and magnitude, there will inevitably be areas of disagreement. What is important is that the issues be discussed openly and fully, and as much progress as possible be made in resolving differences. It is important, for example, that we exchange our respective perspectives on what is an underlying tenet of American society -- respect for human rights -- and on our long-standing tradition of advocating human rights around the globe.
At this point I'd like to surrender the podium, so that Minister Xiang can make his opening statement. Before I do this, however, I'd like to introduce the key members of the U.S. delegation who will be participating in the discussions today. Thank you very much. I look forward to a fruitful and important meeting.
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