FROM THE OFFICE OF PUBLIC AFFAIRS

At the invitation of U.S. Treasury Secretary Paul H. O’Neill, Chinese Finance Minister Xiang Huaicheng led an official delegation to the United States to co-chair the 15^th session of the China-U.S. Joint Economic Committee (JEC) on September 9^th. Both sides noted the importance of a high-level dialogue on economic issues of mutual concern.

In the meeting, discussions focused on:

Macroeconomic Developments. Both sides noted that prospects for the global economy have improved since the last JEC. Stronger economic performance and reduced vulnerabilities in both the U.S. and Chinese economies are vital for sustaining the global recovery that is underway. In the U.S., growth has resumed, inflation is low, and economic fundamentals are sound. The U.S. side emphasized that fiscal and monetary policies are in place to support the economic expansion, including a corporate responsibility act to punish corporate fraud and protect investor rights. The Chinese economy is growing steadily and FDI inflows are strong. Key structural reforms in the fiscal, financial and corporate sectors are ongoing. The Chinese side explained that strengthening domestic demand, accelerating economic restructuring and China’s integration with the global economy are fundamental for sustained macro-economic success. The Chinese side made a useful presentation on rural economic developments in China.

Financial Sector Issues. Both sides recognized the important contributions an open, transparent financial sector can make to economic growth and productivity. The U.S. side emphasized that foreign direct investment in the financial services sector can more efficiently harness the potential of domestic savings and noted the importance of transparency in regulation of the financial sector. The Chinese side outlined financial service liberalization efforts currently underway, in line with China’s WTO commitments.

Cooperation on Terrorist Finance, Anti-Money Laundering and Other Issues. Both sides pledged to reinvigorate efforts to combat the financing of terrorism and money laundering, including improving international cooperation and placing greater focus on financing mechanisms outside the mainstream financial system. China clarified the role of its existing mechanism for fighting the financing of terrorism and its recently established inter-ministerial coordinating mechanisms for anti-money laundering. Both sides noted the important efforts being made through the Financial Action Task Force (FATF), and regional FATF-style bodies, the Asia Pacific Economic Cooperation forum (APEC), and the international financial institutions. They discussed ways to strengthen cooperation under existing agreements regarding trade in goods made by prison labor.

International Financial Institutions. Both sides discussed ways to increase the effectiveness of multilateral development bank operations, including supporting increased country ownership, focusing on operations that increase productivity, emphasizing measurable results on the ground, and increasing support for the private sector. The Chinese side raised the issue of the U.S. voting policy in MDBs with regard to China, and the U.S. side suggested further exchange of views on this issue. Both sides highlighted the importance of greater use of grants for the poorest countries, on the basis of sufficient financing for concessional windows at MDBs by the donors. Both sides welcomed the recent conclusion of replenishment negotiations for the Global Environmental Facility and look forward to a successful GEF Assembly meeting in Beijing in October.

Participation on the U.S. side included representatives from the Treasury, Federal Reserve, Office of the U.S. Trade Representative, Council of Economic Advisors, Securities Exchange Commission, Department of State, and Department of Commerce. The Chinese delegation included representatives from the Ministry of Finance, People’s Bank of China, Ministry of Foreign Affairs, Ministry of Public Security, State Development Planning Commission, Ministry of Justice, China Securities Regulatory Commission, China Insurance Regulatory Commission and the Legislative Affairs Office of the State Council.