As special representatives of President Barack Obama and President Hu Jintao, U.S. Treasury Secretary Timothy Geithner and Chinese Vice Premier Wang Qishan concluded the meeting of the Economic Track of the Fourth U.S.-China Strategic and Economic Dialogue in Beijing today. They were joined by a high-level delegation of Cabinet members, agency heads, and senior officials from both countries.
The two countries reaffirmed the importance of implementing the consensus reached by President Barack Obama and President Hu Jintao in January 2011 on building a U.S.-China cooperative partnership based on mutual respect and mutual benefit, the outcomes from the visit of Vice President Xi Jinping to the United States in February 2012, as well as the outcomes reached in previous Strategic and Economic Dialogues. The two countries announced further concrete measures to enhance macroeconomic cooperation, promote open trade and investment, enhance international rules and global economic governance, and foster financial market stability and reform.
I. Enhancing Macroeconomic Cooperation
Since the third meeting of the Strategic and Economic Dialogue (S&ED) in May 2011, the United States and China have taken significant actions to sustain economic momentum and balanced growth in both countries, foster a durable global recovery, and establish strong, sustainable, and balanced future global growth.
The United States and China pledge to work together to address global economic challenges. The two sides reiterate their commitment to enhancing cooperation and working together for the success of the G-20 Los Cabos Summit.
The United States remains committed to moving toward a pattern of growth that features increased levels of investment and exports, and a rise in the gross saving rate in the medium term toward the average level of the past 30 years (1980-2010). In line with the President’s Fiscal Year 2013 Budget, the United States commits to achieving more than $5 trillion in balanced deficit reduction over the next ten years, including more than $1 trillion in discretionary spending reductions enacted last year, as well as additional spending reductions, among them reforms to entitlement programs; tax reform that raises revenue from high-income taxpayers, lowers rates, and cuts tax loopholes and expenditures; and stronger budgetary rules to enhance predictability and credibility. This will put the United States on course to gradually reduce Federal government debt as a share of the economy from the middle of this decade.
China is committed to transforming its economic development pattern, improving the livelihood of its people and actively expanding domestic demand, with increasing consumption as a strategic priority in expanding domestic demand. To promote those goals materially, China is to intensify structural tax reduction policies. China endeavors to reduce import tariffs on certain consumer goods which are closely related to its people's daily lives by the end of 2012. China is to actively expand the coverage of the “VAT for business tax” pilot reform, and gradually extend the coverage of the VAT reform to all service sub-sectors and regions, in a bid to eliminate double taxation and accelerate the development of the service sector.
China further improves the state-owned capital returns collection system, by steadily increasing the dividend payout ratio of SOEs and increasing the number of both central and provincial SOEs that pay dividends to the government, and uniformly incorporating the state-owned capital management budget into the national budget system. China encourages all listed companies, including listed companies with the state as the controlling shareholder, to increase their dividend payouts. In addition, China encourages the increase of the average dividend payout levels of listed companies with the state as the controlling shareholder to be in line with average market levels of other publicly listed domestic companies.
China and the United States are determined to implement fully their G-20 commitments to move more rapidly to more market-determined exchange rate systems and enhance exchange rate flexibility to reflect underlying economic fundamentals, avoid persistent exchange rate misalignments, and refrain from competitive devaluation of currencies. The People’s Bank of China intends to continue to adopt a mix of monetary policy tools to implement prudent monetary policy, in order to promote sustainable growth and price stability. China remains committed to continue the exchange rate regime reform, enhance the RMB exchange rate flexibility in both directions, and let market supply and demand play a more basic role in the formation of the exchange rate. The United States welcomes China’s statement that it enlarged the floating band of the RMB’s trading prices against the U.S. dollar in order to promote these goals. China is to steadily promote the market-based reform of interest rates, to enhance the role of interest rates in optimizing resource allocation and monetary policy transmission. The Federal Reserve is firmly committed to promoting maximum employment and price stability. The Federal Reserve has taken important steps in recent years to strengthen the transparency of its policies and goals, including specification earlier this year of a longer-run goal for inflation of two percent. In order to achieve its goals, the Federal Reserve takes into account many factors, including both the domestic and international implications of its policy.
The United States and China are committed to continuing to exchange views on developments in European financial markets and discuss approaches that can support Europe’s own efforts to restore financial stability and growth. Both sides support the IMF’s role in promoting global economic and financial stability. The United States and China affirm the importance of timely implementation of 2010 reforms to the IMF.
II. Promoting Open Trade and Investment
The United States and China reaffirmed the importance of fostering open, fair, and transparent investment environments to their domestic economies and to the global economy. Following the conclusion of the United States model bilateral investment treaty (BIT) review in April 2012, the two sides commit to schedule a seventh and subsequent negotiating rounds, and to intensify negotiations.
The two sides are committed to building a more open global trade system and jointly resisting trade protectionism. The United States and China recognize that it is critical to follow WTO rules when initiating trade remedy investigations and imposing trade remedy measures, to prevent their abuse, and commit to refrain from using such measures for purposes other than trade remedies themselves, including to achieve industrial policy objectives. The two sides commit to respect the decisions of the WTO dispute settlement mechanism. Both sides commit to handle anti-dumping and countervailing duty investigations in a fair, objective, and transparent manner.
Both sides commit to further strengthen capacity building in, and resources devoted to, law enforcement against intellectual property rights (IPR) infringement. China is to improve IPR related laws and regulations and study further strengthening of measures for the pursuit of criminal liability for IPR infringement. Both sides commit to continue enforcement efforts in IPR border protection to reduce cross-border trade in IPR-infringing goods. The United States and China commit to create an environment for their respective markets, whereby the level of sales of legitimate IP-intensive products and services increases, reflecting economic growth and in line with the two countries’ status as globally significant producers and consumers. The United States appreciates that China is continuing efforts to require the use of legitimate software by government agencies. China has incorporated the software assets into the government assets management system, and reflects the expenditures on information network and software procurement and updates in the budget accounts, and, building on the initial priority enterprises pilot project, is to extend its legalization efforts in the enterprise sector.
The United States and China commit to intensive, on-going discussions, including all relevant agencies, of the implementation of China's February 2012 commitment that technology transfer and technology cooperation is to be decided by businesses independently and not be used by the Chinese government as a pre-condition for market access.
The United States and China affirm that the protection of trade secrets is an important part of the protection of intellectual property rights, and are to intensify enforcement against trade secret misappropriation. China affirms that enforcement against trade secret misappropriation is to be included in the 2012 Annual Work Plan of the State Council Leading Group on Intellectual Property Enforcement.
The United States commits to give full consideration to China’s request that it be treated fairly as the United States reforms its export control system. The United States commits to take efforts to facilitate the export of civilian high-tech exports to China for civilian end-users and civilian end-uses. Both sides are to take efforts to create a favorable environment to facilitate and expand bilateral civilian high-tech trade. The United States and China are to take these steps through the China-U.S. High-Technology and Strategic Trade Working Group. The United States and China are to hold the China-U.S. High-Tech Trade Seminar in China soon, to discuss measures facilitating high-tech and strategic trade.
The United States commits to process, in a timely manner, specific requests for items for civilian end-users and civilian end-uses that China wishes to procure that may be subject to export controls, once the United States receives all necessary information required under the Export Administration Regulations. The United States commits to review the documents provided by COMAC in support of its Validated End User application and respond whether the application is complete, in a timely manner. The United States commits to encourage Chinese civilian end-users to apply for Validated End User authorization to receive items for civilian end-uses.
The United States commits to amend its controls on certain dual-use items to implement changes in the Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies resulting in facilitated exports to most countries, including China, if for civilian end-users and civilian end-uses.
The United States commits to urge other Government Procurement Agreement (GPA) parties to provide requests for improvements in the Chinese revised offer that was submitted at the end of 2011. China commits to submit a new comprehensive revised offer, that responds to the request of the GPA parties, to the WTO Committee on Government Procurement before the committee’s final meeting in 2012. China is fully aware of the importance of specifying the definition of domestic goods in a flexible manner. In revising the Implementation Regulations for the Government Procurement Law and the Administrative Measures for the Government Procurement of Domestic Products, China is to accommodate to the maximum extent possible the opinions and suggestions of relevant parties, including the United States, and enhance the operability and transparency of those regulations. Consistent with the Legislative Plan of the State Council and government procurement working plan of the Ministry of Finance for 2012, China is to issue the Implementation Regulations for the Government Procurement Law and the final Administrative Measures for the Government Procurement of Domestic Products as soon as possible.
The United States commits that the Committee on Foreign Investment in the United States (CFIUS) applies the same rules and standards to each transaction that it reviews, without regard to the investor's country of origin. CFIUS’s reviews focus exclusively on national security, regardless of whether the transactions involve government-controlled or private foreign investors. When a transaction poses a national security risk, CFIUS works to resolve it as expeditiously as possible, including through targeted mitigation rather than blocking the entire deal, to the extent practicable. The United States and China are committed to continuing to discuss concerns with and concepts used in their respective foreign investment reviews, including through the U.S.-China Investment Forum.
China commits to provide fair treatment to foreign investors in China. China is to focus its security review over mergers and acquisitions (M&A) by foreign capital solely on national security concerns and adhere to specific timelines and review standards. China is to continue to simplify its foreign investment approval system and enhance transparency on a step-by-step basis. During the 12th Five Year Plan period, China is to implement a more proactive opening-up strategy and expand the areas open to foreign investment and the degree of openness.
The U.S. Government’s SelectUSA program assists current and prospective investors in the U.S. market, including Chinese enterprises, and takes on increased responsibilities for the promotion of this investment. SelectUSA commits to assist with introductions between economic development officials and Chinese enterprises and government officials interested in exploring investment opportunities in the United States, and work to ensure that Chinese enterprises have the information they need to invest in the United States.
The United States supports improving its infrastructure sector, enhancing market mechanisms for infrastructure investment, incorporating best practices and lessons learned from all applicable global infrastructure systems, and working to enhance Public-Private-Partnership (PPP) investment opportunities where appropriate, including from foreign investors. In recognition of this goal, President Obama’s FY 2013 Budget proposes a plan to renew and expand America’s infrastructure systems and calls for the creation of a National Infrastructure Bank to enhance investment opportunities for all public and private capital to invest in transportation, water, and energy infrastructure sectors. The United States and China recognize the potential for their firms to play a positive role in infrastructure financing in each country, and commit to explore opportunities for deepening cooperation in this field.
The Chinese Government commits to developing a market environment of fair competition for enterprises of all kinds of ownership and to providing non-discriminatory treatment for enterprises of all kinds of ownership in terms of credit provision, taxation incentives, and regulatory policies.
The United States welcomes business investment from all countries, including China, and including from state-owned enterprises.
China reaffirms its commitment to follow the generally accepted principles and practices of Sovereign Wealth Funds (SWFs). The United States reaffirms its commitment to upholding the open and non-discriminatory principles toward sovereign wealth funds as described in the Declaration on Sovereign Wealth Funds and Recipient Country Policies announced by the OECD in June 2008.
The U.S. federal government commits to provide active support and assistance in promoting bilateral sub-national economic cooperation. The second U.S.-China Initiative on City-level Economic Cooperation is to be held on June 20-21 in Nanjing, China.
The Civil Aviation Authorities of the United States and China commit to continue to strengthen communication and cooperation in the field of aircraft airworthiness certification, through currently established channels, in order to achieve reciprocal acceptance of civil transport category airplanes, at the appropriate time, as determined by the ongoing technical evaluation.
III. International Rules and Global Economic Governance
The United States and China recognize the importance of international rules governing trade and finance that reflect the evolving global economic system and the role that its participants play.
Based on the “Joint Fact Sheet on Strengthening U.S.-China Economic Relations” released in February 2012, the United States and China are to establish an international working group of major providers of export financing to make concrete progress towards a set of international guidelines on the provision of official export financing that, taking into account varying national interests and situations, are consistent with international best practices, with the goal of concluding an agreement by 2014. The United States and China welcome the first meeting of the international working group of major providers of export financing to be held in mid-2012 in Washington D.C., where the group is expected to agree on its work plan.
Both sides commit to strengthen information exchange on the Trans-Pacific Partnership (TPP), China-ASEAN Free Trade Agreement, and other regional free trade agreements through existing mechanisms.
Both sides commit to deepen the study of bilateral trade statistics methodology, including new trends in international trade statistics methodology, using the U.S.-China JCCT Statistics Working Group.
China and the United States recognize that currencies in the SDR basket should only be those that meet the existing inclusion criteria. In that regard, the United States supports the inclusion of RMB into the SDR basket when it meets the IMF’s inclusion criteria.
We welcome the efforts by the IMF in advancing consideration of an integrated surveillance decision and commit to support the decision process. While recognizing the importance of rigorous surveillance on exchange rate policies, we also support a more ample coverage of surveillance activities, where relevant, including global liquidity, capital flows, capital account measures, reserve and fiscal, monetary and financial sector policies that could have an impact on external stability. We welcome the ongoing work to improve external sector analysis, which would strengthen multilateral analysis and enhance the transparency of surveillance, noting the IMF’s work to produce External Sector and spillover reports.
IV: Fostering Financial Market Stability and Reform
Both sides recognize that, to achieve strong, sustainable, and balanced growth, it is important to support the stability of international financial markets, reform and develop our financial sectors, and strengthen financial regulation.
The United States and China are committed to building a sound financial system to support the real economy, and to effectively implement the international financial regulatory framework based on the G-20 consensus. The two sides are committed to strengthen the supervision of systemically important financial institutions and risk resolution, develop effective resolution regimes for financial firms, and enhance the regulation of the financial derivatives. The two sides commit to maintain efforts to deepen the compensation reform of financial institutions. China and the United States support the objective of a single set of high quality global accounting standards.
The United States welcomes the publication of the results of China’s Financial Sector Stability Assessment, conducted by the IMF and World Bank, and is encouraged by the broadly favorable findings with respect to the Basel Core Principles for Effective Banking Supervision. The IMF's report notes that consolidated supervision of banks and their direct subsidiaries and branches on the mainland or offshore is of high quality. The United States recognizes and welcomes the further substantial progress made by China in the area of comprehensive consolidated supervision (CCS).
The United States welcomes foreign investment in all sectors, including the financial sector, and remains committed to apply the same prudential and regulatory standards to applications made by Chinese banks, securities, and fund management companies as they apply to other foreign financial institutions in like circumstances. Pending applications by Chinese banks are under active review and consideration and authorities will endeavor to act expeditiously.
Both sides commit to strengthen cooperation on information of financial market infrastructure and specialized financial institutions, and enhance communication and collaboration on building exchanges and the exchange system.
To promote consumer finance, China commits to keep on approving applications by qualified auto financing companies (AFCs) and financial leasing companies, including foreign invested entities, to issue financial bonds in China according to legal procedures. Foreign- and Chinese-invested financial institutions enjoy the same treatment in issuing credit asset-backed securities during the trial period of asset securitization in China.
China is to amend relevant regulations to allow foreign investors to hold up to a 49 percent equity stake in securities joint ventures, which are allowed to engage in underwriting and sponsoring of stocks (including common share denominated in RMB and foreign share) and bonds (including government bonds and corporate bonds) and to allow qualified securities JVs which have been in on-going operation for no less than two years to acquire additional licenses and broaden their business scope. China commits to allow foreign investors to hold up to a 49 percent equity stake in futures broker joint ventures. To steadily promote the opening-up of China's capital markets, China increases the total quota for Qualified Foreign Institutional Investors (QFII) to $80 billion.
The United States and China have decided to continue to enhance their cooperation in strengthening the global financial system against money laundering, counterfeiting, and the financing of proliferation and terrorism activities. The two countries commit to continuing to enhance both policy and operational cooperation on combating illicit finance. China expects to continue to improve its regulatory framework for freezing terrorism-related assets.
The two sides are going to hold discussions with regard to the Foreign Account Tax Compliance Act (FATCA) and the drafting of its implementing rules to provide an opportunity to discuss China’s concerns. The two sides commit to seek a cooperative solution with regard to the implementation of FATCA.
V. Strengthening the U.S.-China Economic Relationship through the S&ED
The United States and China underscore the positive role of the Economic Track of the four S&EDs in promoting a stronger and more balanced U.S.-China economic relationship. Through the dialogue, the two countries have increased consultation on policy actions concerning major bilateral and global economic issues, deepened mutual understanding and trust, and enhanced practical cooperation in economic, trade, investment, and financial fields.
The United States and China reaffirm their pledges to implement commitments as set forth in the S&ED Economic Track Joint Fact Sheets.
Recognizing the U.S.-China economic relationship is based on a wide range of common and overlapping interests, the two countries reaffirm their commitments to continue to promote communication and cooperation from a strategic, long-term, and overarching perspective, to add to prosperity and welfare in the two countries, and achieve strong, sustainable, and balanced growth of the global economy.
I. Participants in the Economic Track of the Fourth Strategic and Economic Dialogue
Timothy F. Geithner, Secretary of the Treasury
Gary Locke, U.S. Ambassador to China
John Bryson, Secretary of Commerce
Ronald Kirk, U.S. Trade Representative
John P. Holdren, Director of the Office of Science and Technology Policy
Ben S. Bernanke, Chairman of the Federal Reserve
Fred P. Hochberg, Chairman and President of the U.S. Export-Import Bank
Lael Brainard, Department of the Treasury, Under Secretary of Treasury for International Affairs
Robert D. Hormats, Department of State, Under Secretary of State for Economic Growth, Energy, and Environment
Demetrios Marantis, Office of the U.S. Trade Representative, Deputy U.S. Trade Representative
Francisco Sanchez, Department of Commerce, Undersecretary of Commerce for International Trade
Leocadia I. Zak, Director of the U.S. Trade and Development Agency
David Sandalow, Department of Energy, Assistant Secretary for Policy and International Affairs
James R. Doty, Chairman of the Public Company Accounting Oversight Board
Ethiopis Tafara, Securities and Exchange Commission, Director of the Office of International Affairs
Warren Gorlick, Commodity Futures Trading Commission, Associate Director
Frederick S. Carns, Federal Deposit Insurance Corporation, Director of the Office of International Affairs
Michael McRaith, Department of the Treasury, Director of the Federal Insurance Office
Susan Voss, Iowa State Insurance Commissioner
Wang Qishan, Vice Premier, State Council
Xie Xuren, Minister of Finance
Wan Gang, Minister of Science and Technology
Chen Deming, Minister of Commerce
Zhou Xiaochuan, Governor, People’s Bank of China
Liu He, Deputy Director, Central Finance and Economic Affairs Leading Group
Zhang Yesui, China’s Ambassador to the United States
Bi Jingquan, Deputy Secretary General, State Council
Cui Tiankai, Vice Minister of Foreign Affairs
Zhang Xiaoqiang, Vice Chairman, National Development and Reform Commission
Zhu Guangyao, Vice Minister, Ministry of Finance
Wang Chao, Vice Minister, Ministry of Commerce
Yi Gang, Administrator, State Administration of Foreign Exchange
Huang Shuhe, Vice Chairman, State-owned Assets Supervision and Administration Commission
Wang Zhaoxing, Vice Chairman of the China Banking Regulatory Commission
Yao Gang, Vice Chairman, China Securities Regulatory Commission
Li Kemu, Vice Chairman, China Insurance Regulatory Commission
Zhang Kunsheng, Vice Minister, Ministry of Foreign Affairs
Wu Yin, Vice Minister, National Energy Administration
Li Ruogu, President, Export-Import Bank of China
II. Institutional Arrangements
The United States and China reaffirm that deepening bilateral economic cooperation and exchange between relevant agencies will advance their common objectives of increasing prosperity and improving the livelihoods of the people in each country.
In support of these objectives, both sides affirmed their commitment to further economic cooperation through additional dialogues and initiatives, including:
- Enhancing coordination and cooperation under the APEC framework;
- Examining key issues in the bilateral investment relationship at the Fifth U.S.-China Investment Forum in April 2012, including carrying out an exchange on investment policies and infrastructure financing in both countries and reaffirming the value of exploring new areas for cooperation;
- Discussing innovation topics of mutual interest, including best practices on innovation policies, metrics for measuring innovation performance, and sub-national level innovation policies and cooperation and committing to support researchers' and firms' efforts to increase cross-border R&D collaboration and strictly enforce the IPR laws and regulations in each country at the Third U.S.-China High Level Innovation Dialogue;
- Deepening and expanding dialogue and technical exchanges under the U.S.-China Transportation Forum;
- Continuing to exchange views on Rules of Origin (ROO) related issues and case studies on the issue and conducting a Joint Expert Dialogue on ROO in June 2012;
- Committing to sign the Memorandum of Understanding on Small and Medium-sized Enterprises Cooperation and Development between China’s Ministry of Industry and Information Technology (MIIT) and the U.S. Commerce Department by the end of 2012;
- Developing a 2012 and 2013 work plan and budget under the U.S.-China Intellectual Property Rights Cooperation Framework Agreement;
- Endeavoring to establish an annual U.S.-China Workplace Safety and Health Dialogue, with the first session to take place by the end of 2012;
- Continuing to address common challenges and share best practices at the July 2012 U.S. Department of Labor - China Ministry of Human Resources and Social Security Dialogue;
- Holding meetings this year among the U.S. Department of the Treasury, the People’s Bank of China, and U.S. and Chinese law enforcement agencies, focusing on major threats faced by the financial system and exploring the possibilities for strengthening bilateral cooperation;
- Strengthening cooperation in consumer protection and prevention of systemic risks and the development and implementation of prudential regulation in the insurance sector among the China Insurance Regulatory Commission (CIRC), the U.S. Department of the Treasury’s Federal Insurance Office (FIO), and relevant U.S. insurance regulators;
- Providing U.S. technical assistance to China on gold derivatives exchanges;
- Providing U.S. technical assistance on commodity futures and training on surveillance and transparency tools;
- Intending to hold the Sixth Bilateral Banking Supervisors' Conference, a GPA workshop, and meetings regarding FATCA; and
- Strengthening communication and cooperation in areas such as border enforcement of IPR protection, manufacturing industries, railway, infrastructure, agriculture, biotechnology, bond market development, and trade in services.