May 23, 2007
The Second U.S. – China Strategic Economic Dialogue
May 22-23, Washington
Joint Fact Sheet
In Washington on May 22 and 23, the United States and China held the second Strategic Economic Dialogue (SED). As special representatives of Presidents Bush and Hu, Treasury Secretary Henry M. Paulson, Jr. and Vice Premier Wu Yi served as co-chairs of the SED.
The United States and China agreed to the following principles building on the consensus reached at SED I:
- Promoting balanced economic growth in a manner compatible with sustained development is a shared responsibility of the two sides.
- Recognizing the importance of innovation in creating a prosperous economy, and encouraging market-oriented fair competition, effective property rights, and, specifically for small and medium enterprises, the development, management, and application of innovation.
- Strengthening cooperation on meeting respective goals in energy security, conservation, and efficiency; developing clean sources of energy; environmental protection; clean development; and addressing climate change.
- Cooperating and exchanging information on transparency to enhance predictability for market participants, promote confidence in our economies and build on their international obligations.
Discussions led to a number of results that strengthen and deepen the bilateral economic relationship, including:
- In financial services, China will resume licensing securities companies in the second half of 2007, and before SED III, China will announce to gradually expand the business scope of qualified joint-venture securities companies to allow them to be engaged in securities brokerages, propriety trading and asset management; increase the total quota for Qualified Foreign Institutional Investors (QFIIs) to $30 billion under the prerequisite of promoting its international balance of payment; allow foreign incorporated banks qualified for RMB retail businesses to issue RMB bank cards which meet the operational and technical standards of China's banking cards, and enjoy the same treatment as Chinese banks; and allow foreign property insurance companies to apply for conversions into subsidiaries. China Insurance Regulatory Commission (CIRC) will complete decisions on pending applications by August 1, 2007. China expanded the scope of investment products for Qualified Domestic Institutional Investors (QDIIs). The United States strongly supports full membership of China at the Financial Action Task Force (FATF) in June 2007 with the understanding that China will take appropriate steps to ensure that it meets FATF's core membership criteria, confirms that any application by a Chinese bank to establish branches in the United States will be considered consistent with the principle of national treatment, and commits to regulatory personnel exchanges.
- In non-financial services and trade, both sides announced an agreement to expand the existing bilateral aviation agreement which greatly increases the number of flights between the two countries annually, provides for full liberalization for cargo services as of 2011, and both sides agreed to commence negotiations in 2010 on an agreement and timetable for full liberalization of passenger services; a joint declaration to launch Chinese group leisure travel to the United States; a MOU on sovereign guarantee financing cooperation; and the import by China of U.S. railway equipment. Both sides agreed on "Guidelines for U.S.-China High Technology and Strategic Trade Development." Both sides will continue to cooperate on transparency in government legislation, and co-host a seminar involving administrative licenses. China will publish revised implementing regulations on international freight forwarding in 2007.
In energy and the environment, the United States and China agreed to work together in a pragmatic manner to actively participate in WTO multilateral negotiations on trade and environment, and engage in discussions on the reduction or, as appropriate, elimination of tariff and non-tariff barriers to environmental goods and services. The United States and China will strengthen cooperation in the following areas: advancing clean coal technology, aiming to develop up to 15 large-scale coal-mine methane capture projects in China, finalizing participation of China in the Government Steering Committee of the FutureGen project, providing policy incentives to abolish cost barriers to full commercialization of advanced coal technologies, advancing the research and development of carbon capture and storage technologies, and formulating a national low sulfur fuel policy for China. The United States and China jointly announce an agreement for voluntary energy efficient product endorsement labeling (EnergyStar) certification. Both countries signed a Memorandum of Cooperation on Nuclear Safety for the Westinghouse AP1000 Nuclear Reactor.
- In balancing growth, the United States will provide technical assistance on developing financial markets and rural finance. Both countries agree to staff exchanges and information sharing regarding labor market policies. The U.S. – China Health Care Forum was successfully convened prior to SED II. The United States and China also agree to pursue significant measures to lower China's national saving rate and increase the United States national saving rate. The United States welcomes China's announcement to widen the RMB daily trading band.
- In innovation, China's General Administration of Customs, and the U.S. Customs and Border Protection, Department of Homeland Security signed a Memorandum of Cooperation on IPR Enforcement. The United States and China also signed a letter of intent on the establishment of a consultative mechanism in standards and trade-related technical measures and will host a seminar on the critical elements of technical innovation.
Both sides decided to prioritize work during the next six months in several areas:
- To promote a reduction in current account imbalances in a manner compatible with sustained economic growth, China will continue to deepen reform of the exchange rate regulation system, further improve the formation of a RMB exchange rate mechanism, bring into greater role of market supply and demand, and increase the flexibility of the exchange rate. The United States will implement measures to increase long run fiscal responsibility and introduce new ways to encourage private saving. Both sides also agree to strengthen cooperation on health care services and statistics related to U.S.-China trade and employment. The United States welcomes Chinese investment in the United States, and China welcomes U.S. investment in China.
- Launch agreement consultations to facilitate Chinese group leisure travel to the United States, continue discussions on the possibility of a bilateral investment agreement, and strengthen consultation and cooperation on China's market economy status. The two sides shall seek to clarify misunderstandings and resolve differences to promote the rapid development of civilian high technology and strategic trade. China will streamline the application and licensing process for the provision of enterprise annuities including by foreign-invested enterprises by SED III.
- Engage in dialogue on illegal logging and explore ways to cooperate including through a bilateral agreement. Continue exchanges on management of oceans and fisheries, strategic petroleum reserves, and on fostering environmentally sound management of recyclable waste materials; strengthen cooperation on the Global Nuclear Energy Partnership and promote bilateral exchanges and cooperation on energy, environmental protection, and clean development and climate change; and advance the Joint Study of Abatement Strategies.
- Identify new areas of cooperation to strengthen innovation capabilities, as well as deepening cooperation to enhance laws, policies, programs and incentives that encourage innovation. The United States and China will continue to cooperate on transparency in rule-making, inviting representatives from their legislative and judicial organs of government to appropriate future meetings.
The third SED will be held in Beijing in December 2007.
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