3:15 P.M. EDT
Well, nice to see you. Thank you for coming. I’ll just say a few things at the beginning, and then I’d be happy to answer your questions. As you know, the president of the United States and the president of China jointly announced the establishment of the Strategic and Economic Dialogue in London in April. At that point, they committed to establish a – how did they describe it – a cooperative comprehensive relationship.
That evening, I met with Vice Premier Wang Qishan and he invited me at that point to come to China. So it’s my pleasure, my privilege, to be traveling to China later this week. I leave Saturday. I’m going to be there for two days. I’m going to give some remarks at Beijing University and take questions. I’m going to have a series of meetings with the leadership of your country.
And I want to just say a little bit about what my objectives are and what – broader objectives which will guide our relationship on the economic front going forward.
Of course, in this context, I’m going to be laying the foundation for the first meeting of the Strategic and Economic Dialogue, but there are four specific issues that I think we’ll spend most of our time talking about.
The first is to take stock of our collective efforts to lay the foundation for recovery around the world. China and the United States, in many ways, have been the most aggressive and comprehensive in putting in place programs to help respond to the global economic financial crisis, lay the foundation for recovery. We’re at the point now where we’re seeing some signs of stability, some improvement in the financial system. But we have a lot of challenges ahead, and it’s very important that, as I said, we take stock of how the global economy is faring, what the risks are ahead, what additional policies at the global level may or may not be appropriate to help reinforce the prospects for recovery.
A second broad objective is that we want to begin now to lay a foundation for a more balanced, more sustainable global recovery going forward. So that involves many things, but let me just mention a few things. In the United States, for example, it’s very important that we lay out, as the President has, a path for bringing our fiscal deficits down to a more sustainable level over time. We want to begin to make the investments now in the United States that will make our economy more productive in the future, which is why the President has proposed very substantial policies to help improve education outcomes in the United States, improve infrastructure, improve energy efficiency, and of course, health care reforms that help bring down growth in health care costs going forward.
It involves financial reform. We want to put in place a stronger regulatory framework in the United States so that our financial markets, our financial system, is less prone in the future to the kind of big swings and periodic crises we’ve seen over the last 25 years.
But it also, at a global level, means that we want to have in place the conditions globally for, as I said, a more balanced, more sustainable recovery. So just like in the United States, this requires a transition to higher savings in the United States, less reliance on consumption fueled by borrowing, outside the United States, including in China, we want to see stronger domestic development growth. So again, we have foundations for a more balanced, and therefore more stable, more sustainable global recovery.
Third issue is – I would say involves-- the international financial architecture. Both China and the United States have a great interest in building a stronger framework for cooperation globally; stronger, more effective, more legitimate, more responsive international institutions at the heart of that framework; the kind of strong international standards over financial systems that will make financial systems everywhere more stable. And so that broad international reform agenda is a third important topic for discussion going forward.
And of course, in that context, we’ll be discussing China’s role in the international institutions. I think China and the United States, as I said at the beginning, both have a great interest, a common interest, in making sure that the international system as a whole is functioning well.
And finally, there are a range of issues where we’re going to want to strengthen and deepen our cooperation together, both because of the immediate importance of the issues for our countries, direct importance for our countries, but also because of the importance to the world. And the best example, of course, is in the energy area, where China and the United States have a huge interest in cooperating in terms of policies, technology, other types of approaches to help address the broader challenges posed by climate change. So in the energy area in particular, we’ve got another type of issue. That’s just one example where we’re going to want to look for areas where we can cooperate on common policies, common approaches.
As you know, I have a long personal interest in China. I studied in China when I was in college. I studied at Beida (Beijing University) and Beishida (Beijing Normal University) two summers in 1981 and ’82. I was an assistant teacher of Chinese for three years in college, I believe, studied in graduate school. My first job out of graduate school was working most of my time on China, and I have a lot of other personal longstanding connections to China, and so I’m very much looking forward to going back to China and beginning a process of close cooperation as Secretary of the Treasury with my counterparts in China.
Thank you for that. Yes.QUESTION:
Sorry, I have a few questions. Can I ask one, just -- SECRETARY GEITHNER:
Why don’t you just ask one, then we can – (laughter).QUESTION:
Okay, yeah. So which one? I have my thoughts right –SECRETARY GEITHNER:
By the way, at the beginning – just to correct this – the words that both President Obama and President Hu used in London were “positive, cooperative, and comprehensive.” I said cooperative and comprehensive. I didn’t say positive. Of course positive. (Laughter.)QUESTION:
We were wondering that in the past there’s (inaudible) leading this as the Treasury, but now it’s totally under State Department. And there is concern that maybe these two – you know, the tracks, the double tracks from this front and the economic front going forward together may be some problems involving cooperation in these departments and all those (inaudible) – can you comment on that?SECRETARY GEITHNER:
I don’t think so. I think – in fact, I think it’s been designed to reduce that risk. So we do have these two important broad policy areas where we want to cooperate more closely on the economic side and on the strategic – on the political side. But we’ve agreed we’re going to have a joint integrated approach, and we, I think, both sides have an interest in making sure these things work closely together. So I don’t think there’s any risk of that, and we’ll be careful to reduce that risk.QUESTION:
So if you are lead on this, if your contacts are greater (inaudible) – say, if you make some promises and then the Treasury and the State is not (inaudible).SECRETARY GEITHNER:
Well, I don’t think that’s a problem. You know, like in your country, we have a process in place for defining what our interests are, how we’re going to pursue those interests, where we have opportunities for cooperation. We’ll work those things out in the United States.
But you know it’s very important what we’ve done. We took a framework that my predecessor helped work out with his counterpart, with the vice premier, and which is, I think, a very successful framework. We want to preserve that. We want to make sure we elevate the importance of the time and attention the United States is spending with the Chinese – with our Chinese counterparts – on what we call the strategic political side. And I think that’s something that just underscores the importance we attach to the relationship with China. You should view that as a strength, a sign of commitment. So in a sense, what we’re doing is raising the profile of this agenda alongside a well-developed process on the economic side. QUESTION:
And you didn’t mention the issue of China’s investment in American (inaudible). So will it still come out in your trade?SECRETARY GEITHNER:
We will I’m sure cover all the issues on the economic agenda, trade and investment, financial, and I’m sure I’ll have a chance to talk through all those things. But as I said, the immediate priority we feel is in the areas of laying the foundations for a global recovery, making sure as we do that we’re putting in place conditions for a more balanced, more sustainable, more healthy global recovery long term, international financial reform, and some important issues where bilateral cooperation is going to be critical for the world, not just for China and United States, like in the energy area. That’s not to underestimate, you know, to de-emphasize the importance we attach to any of the whole range of issues on the trade and investment front. But I just want to underscore we’ll have a chance to talk about those things, as we always do.
And China is continuing to buy the U.S. Government bonds (inaudible)? (Inaudible) what do you think China is (inaudible)? SECRETARY GEITHNER:
Well, you know, as I said, we’re going to have a chance to talk about a range of important issues for both countries on the economic and the financial front, I should say, but you’ve heard me say this before, nothing new what I’m saying, which is I believe China is playing an important stabilizing role in the global financial system today, particularly through its efforts to help support domestic demand-led growth, to help lead a transition towards an economy that’s driven more by domestic demand. And I look forward to having a chance to talk to my Chinese counterparts on those issues and all other economic issues we face. QUESTION:
Question, so in the first few months, you have been focused on stabilizing the U.S. economy and now it looks like things are getting better. And so the next – people are thinking about the next phase of the crisis, which is the dollar collapse and possibly the Treasury bill will go down too and also the inflation will go up. So when you go to China, what kind of message do you want China to – what do you want to semd to China about the U.S. economy? And --SECRETARY GEITHNER:
Well, I’ll have a chance – this is one reason why the timing of this trip is so important. You know, we want to get a better sense for what’s happening in the Chinese economy, what progress the Chinese authorities believe they’re making in China in addressing the challenges posed by this global recession.
But I’ll have a chance when I’m in China to update my counterparts on what’s happening in the U.S., the policies we already have in place, additional policies ahead. And in that context, I will, of course, make it clear that we are committed to a strong dollar, that we are committed to bringing our fiscal deficits down over the medium term to a sustainable place, to a sustainable level.
And of course, it’s important to the United States and to the Federal Reserve, of course, that we, as soon as recovery is firmly established, we start to unwind or walk back these extraordinary interventions we’ve taken to help stabilize and repair the financial system, which were required by the crisis necessary condition for restoring recovery. But when recovery is established, firmly established, and we’re confident those risks are diminished, then we want to lay the foundation for reducing, walking back those extraordinary interventions. QUESTION:
Where is the economy right now and where it is going to? SECRETARY GEITHNER:
The economy is – but I will only add to what I’ve said in public. You know, there are some signs, encouraging signs of stabilization in the U.S. economy and globally, and you see the same thing globally. The rate of deterioration in output and activity, demand in activity, has slowed significantly, and in the financial system, (shows) some signs of healing and repair. Broad measures of U.S. (inaudible) in the financial system have come down, but I should emphasize that, you know, it took a long time for this crisis, the conditions that led to this crisis to build up. It’s going to take, not just the U.S. economy, but the global economy some time to recover and adjust. We still have a lot of risk and challenge ahead of us. And I think it’s very important that governments around the world to sustain the commitment that they made in London together at the G-20 leaders meeting to make sure they’re doing what is necessary to help the global economy get back on track, the global economy heal. And you know, we want to see growth globally restored to a level consistent with potential. QUESTION:
In the past, when the U.S. leaders visited China, they always complained a lot, such as (inaudible) issue huge deficit, IPI issue. And some analysts in China termed it as the “complaint diplomacy.”SECRETARY GEITHNER:
Complaint diplomacy. That will not be my strategy. (Laughter.)QUESTION:
(Inaudible) what kind of diplomacy? SECRETARY GEITHNER:
Look, you know, my general view is that we are among the two most important economies in the world. We have a huge interest in the policy choices we each make: China in ours, ours in China’s. And we have an obligation to the world, not just to each other, to making sure we’re doing the things in our own countries that’ll help address our unique challenges – and we have many in the United States – because the world has a huge interest in our success economically.
Because we’re so big and so important, both our countries, the effects of our policies on the rest of world are large and significant. So our obligation is to make sure that we are doing as much as we can to address our own challenges here. And certainly, I would come to my conversation with the Chinese as well as with any other country the U.S. deals with the same basic spirit, which is, our first obligation is to explain what we are doing in the United States to address our challenges. QUESTION:
I have a personal question. Since you’ve come to office, you have many chances to meet with the Chinese leaders and your counterpart. I want to know what’s your impression about the Chinese leaders? And besides, while traveling in China, besides some formal meetings, any other unofficial activities, such as some special (inaudible), special place you want to take a look? SECRETARY GEITHNER:
Well, (inaudible) question. You know, on this trip I’m just going to Beijing and my agenda is completely full of the necessary important meetings I have with my counterparts, and I look forward to those meetings. In the future, maybe I’ll have more time and have a chance to do other things. QUESTION:
(Off-mike.) SECRETARY GEITHNER:
But on leaders, I would say in general that China’s response to the crisis has been exemplary. And I have great admiration for the judgments the Chinese leadership has made, not in this crisis, but looking back over the last many years, in terms of how they have managed the transition, extraordinarily delicate challenging transition underway in the Chinese economy.
But as I said at the beginning, I think if you look at the strength of the global response to this crisis, a lot of it has to do with the forcefulness of the policy response in China and the United States. So I have a lot of admiration with what your government has accomplished, and a lot of admiration for the policies they are pursuing today. QUESTION:
I have a question. I think that the next year China will host the expo. May we know now how is the preparation now from the U.S. government for this and what’s the significance for successful Expo to China’s economic development and also to the world economic recovery? SECRETARY GEITHNER:
I’m sure it’s important to China as the Olympics were. But I don’t at this point have anything I can say in more detail about the U.S. preparations or the U.S. role in the Expo. QUESTION:
We haven’t really – we haven’t really attacked the subject of the international finance institutions. One question, it’s a small one, but do you support China to buy the IMF bonds once it’s issued? And if you do, how much do you expect China to buy? SECRETARY GEITHNER:
Well, as you know, in the G-20 Summit, the G-20 leaders agreed to support a very substantial increase in the emergency resources available to the IMF in the future – in the financial crisis through the dramatic expansion of something called the New Arrangements to Borrow. As part of that, the U.S. expects to make a very substantial contribution. And we are very encouraged by the amount of support we’ve seen around the world, not just by major economies, but economies such as China, who are contributing to that supplemental financing arrangement. So I think that answers your question. QUESTION:
No, it’s about a new agreement to borrow. I’m asking about an IMF issuing bonds. SECRETARY GEITHNER:
Oh, you’re talking about bonds to the market outside of that. Are you talking about the means that China participates in the New Arrangements to Borrow? China has proposed, and the IMF is discussing, the specific ways in which China might participate in the New Arrangements to Borrow. You’re looking at me like I’ve got it wrong – (laughter). Let me step back for one second. Prior to our proposal to establish the expanded New Arrangements to Borrow, China was already in discussions with the IMF, as were Japan and a bunch of other countries, to provide, on a temporary basis, bilateral financing to the IMF as a bridge to a larger permanent increase in resources. There are lots of different ways China might participate bilaterally. We’ve been very supportive of those discussions and those commitments.
Our view, though, is – and I think this is the view of the broader international community – which is that we want to have a permanent emergency response capacity associated with the IMF to deal with this crisis and future crises as part of that range of different ways countries can contribute bilaterally, including through some kind of issuance by China of a bond. When the U.S. participates in the NAB and the IMF today, then we in effect get a bond from China. It’s the same basic arrangement we use.QUESTION:
On May 5th
We had a question in New York (inaudible).QUESTION:
(Inaudible.) Yes, could you comment on the sharp drop of U.S. dollar in Treasuries last week? Because once the economy starts to recover and the Treasuries are no longer safe haven for investors, they begin to worry about inflation and so – and then so – Treasuries. So – but if interest keeps growing, then (inaudible).SECRETARY GEITHNER:
Let me just say that I got your question, so let me just say it, and you’ll hear me say this all the time.QUESTION:
We believe in a strong dollar. A strong dollar is in the U.S. interest. We have an independent Fed completely committed to keep inflation low and stable over time. And we will do everything we need to do to make sure that we bring down our fiscal deficits over time to a more sustainable level, and that we work very hard to improve the strength of U.S. economic fundamentals.
I generally don’t talk about markets. That’s why I’m giving you this explanation about our basic policy objectives. QUESTION:
(Inaudible). On May 4th
, this – President Obama announced a new proposal against the tax havens overseas. And that – by that proposal, you are saying actually U.S. companies overseas operations will have to be subject to U.S. tax codes. And there is a lot of concern about this and there are some protest from the industrial world – (inaudible), I mean, say what do you think of that and how will that affect the Chinese – U.S. investment in China?SECRETARY GEITHNER:
I don’t have a sense about what effect it might have ultimately on U.S. investments overseas. It’s hard to judge until we see how the details come out. But let me just state the objectives clearly. You know, we need to make sure that we are enforcing U.S. tax law, closing gaps and loopholes. It’s important to do because it’s sort of fair and just. You want to make sure that Americans that are paying taxes are paying taxes, that that burden is shared more broadly. And as you know, we face very substantial long-term fiscal challenges, and so we’re going to be looking at ways to make sure we broaden the revenue base in that context.
But we’re – we’ve laid out some proposals to the Hill, we’re into the Congress, we’re in the process of refining those proposals. Hard to judge what their impact will be until we look at the specifics. MODERATOR:
I believe there’s another question in New York. QUESTION:
Feng Yuqing, China Business News. During the time of G-20 meeting, you know, China central banker, Mr. Xhou Xiaochuan, you know, he said that maybe in the future, you know, we feel – we (inaudible) think about the world currency instead of dollar’s position in the world trade system. So what do you think about that?SECRETARY GEITHNER:
Well, you know --QUESTION:
(Inaudible) dollar’s position will be – you know, in the future, it’s possible it will be replaced by world currency, or it’s from Americans’ interest? Or how to deal with that?SECRETARY GEITHNER:
My basic view is that the dollar’s role in the global financial system is likely to remain a very substantial role for a very long period of time. QUESTION:
So why don’t you talk about – cure the imbalances? Actually, the RMB is inevitable, the issue of RMB depreciation and (inaudible). So if you’ll talk about that --SECRETARY GEITHNER:
Just to save your time – (laughter) – just so you know, you can ask me those questions any way you want, but I’m only going to say the same thing over and over again like I already said.QUESTION:
What about trading issue? You haven’t touched yet --QUESTION:
What about a bank stress test?SECRETARY GEITHNER:
Stress test – because some major economies called your strategy a “muddle-through” strategy. So how do you think – of that?SECRETARY GEITHNER:
I don’t agree with that, as you might expect. (Laughter.) I think if you look at the scope of what the U.S. has proposed to help repair the financial system and address the crisis, it’s the most comprehensive, most aggressive strategy launched at an early stage in a crisis than you’ve seen, I think, across any major economy going forward. So you look at the scale of efforts to help clean up bank balance sheets, bring more disclosure and transparency, bring more capital into the financial system. You look at this extent of what we’re doing to try to get the securities markets going again, help address the housing crisis. I think it’s a very comprehensive, aggressive strategy, and I think that’s why you’re seeing these early signs of repair.
You know, we’re – the U.S. -- is about 18 months into a recession, but the President’s only been in office for about four and a half months – is that about right? And if you look at the scale of what we’ve initiated in that period of time, you look at how it’s been evaluated by the markets, by the IMF, independent analysts, I think you say that this is a very aggressive, comprehensive approach, not just relative to what’s happening around the world today – not in China, China’s done a very aggressive strategy as well – but if you look at where we are today relative to other major economies, but also just look at the speed of our response compared to what’s happened in other financial crises around the world, we’ve done more in four and a half months than most countries have done in years.MODERATOR:
Just a couple more questions. QUESTION:
Would you like to make any comment on the dispute on economic issues between two countries, namely the dispute on economic issues (inaudible)?SECRETARY GEITHNER:
I don’t think so. My own sense is – again, you know-- we have interests. As countries, our interests won’t always be identical. There are things we’re going to disagree on. There are going to be problems we’re going to have to address. But the importance is that we both recognize how important we each are to the economic fortunes of the other, and how important stability and growth in both our countries are to the world economy. And so we want to do as much as we can to build a strong framework for cooperation not just bilaterally, but working within the international financial institutions. QUESTION:
You are the first – sorry.SECRETARY GEITHNER:
You are the first Treasury Secretary – how to speak Chinese.SECRETARY GEITHNER:
Actually, I should correct you. I cannot actually speak Chinese with any competence.QUESTION:
I did study, though, for a long time, very hard. I studied – rather, I looked – I studied – I practiced my characters very carefully. QUESTION:
(Laughter.) Can I see?SECRETARY GEITHNER:
My calligraphy is very poor, but I did hard – I tried hard.QUESTION:
Can you speak something for Chinese media?SECRETARY GEITHNER:
Not particularly. QUESTION:
The U.S. spoke highly of China’s role in world economy and China’s aggressive stimulus plan. So many economists say – just in D.C. calling for a strong G-2 between the two countries. But Premier Wen Jiabao said it may be improper to form a G-2. So how would you comment to this issue?SECRETARY GEITHNER:
I think I’d just say what I said, which is that both presidents have agreed they’re going to establish this framework for cooperation on the broader economic and strategic front, and we’re going to use that framework to lay a foundation for a good, productive relationship among our countries.
I think that this is an important time to do that, not just because it’s the beginning of a new Administration in the United States, but because the world economy is going through a transforming set of challenges; not just the near-term challenges about the crisis, but because we have an obligation now together to make sure that as we fix the crisis. We’re putting in place, as I said, a better foundation for a more balanced, a more sustainable global recovery, and a international framework for cooperation in the IMF and elsewhere that better reflects the distribution of economic power, economic activity, economic strength around the world, and a stronger framework for cooperation.
Now this is something we did in advance of the G-20 meeting, but a very important step we took, which is to make sure that China had a full seat at the table in the financial stability reform, so that China was sitting with the major economies as we negotiate stronger international centers for financial reform. Those are a good example of our commitment in the United States to try to make sure that we’re working with China to strengthen the core of the international financial system, just like the U.S. worked so closely with major economies 50 years ago to build the IMF, World Bank, and GATT. We have a chance now to make sure that we’re working with China to try to bring about the kind of reforms that’ll ensure that these institutions are more effective in the future.
Excellent conversation, good questions. I look forward to talking to you in the future, but I need to leave. QUESTION: