As Prepared for Delivery
BEIJING – I would like to thank Vice Premier Wang Yang, State Councilor Yang Jiechi, and the Chinese delegation for hosting us at this year’s Strategic & Economic Dialogue, as well as my U.S. colleagues for their participation in this important event. The past two days have been marked by constructive and candid discussions—reflecting the full range of issues we face in our bilateral relationship. This bilateral relationship—between economies that together account for over one-third of global GDP—is a cornerstone of the global economy and it is imperative that we continue to strengthen and build upon it.
I saw on CNN this morning that as we meet in China, students around the country are sitting for their college entrance exams, the gaokao. The exams are the culmination of years of hard work, and reflect the aspirations of Chinese students seeking to better their lives and expand their opportunities.
Our responsibility, as public officials, is to create the conditions that help people achieve their aspirations, including by expanding economic opportunities through our bilateral relationship. That, Mr. Vice Premier, is the test by which we should judge the value of the S&ED.
In eight years of this Dialogue, we have worked hard and I am confident we have passed that test. The S&ED has produced significant results over these past eight years. But just like the students who excel in the gaokao, our work does not end here. We move on to new challenges. I am confident that our two governments will continue to make concrete progress on issues that are important to people in both our countries—cooperating when we can, and directly addressing our differences when we cannot. As we conclude this last S&ED of the Obama Administration, we can look back on the Dialogue’s accomplishments, and also take stock of areas where we need to make progress in the future.
Our economic-track discussions over the past two days focused on several concrete areas:
We discussed creating benefits for both our citizens by expanding opportunities for trade and investment and levelling the playing field for our workers and businesses.
We continued to encourage China to follow through on structural reforms, bolstering financial stability and further reducing excess industrial capacity to move toward stronger and more sustainable and balanced growth, while reducing distorting effects on global markets.
We noted the importance of China’s continued efforts to improve communication on exchange rate and other economic policies, and increase economic data and regulatory transparency.
And we covered the need to cooperate to support and strengthen the international financial system, including by upholding the highest standards of governance.
It is clear from our discussions that China’s leaders recognize the need to reform China’s economy and its growth model. Implementation of the ambitious reform agenda set out by Chinese authorities is essential if China is to successfully rebalance its economy toward domestic household consumption as the key driver of sustainable economic growth.
Let me give a few examples of the progress that we have made at this year’s S&ED:
China committed to continue market-oriented exchange rate reform that allows for two-way flexibility, while stressing that there is no basis for sustained depreciation of the RMB. China reaffirmed its G-20 commitments to avoid competitive devaluation and not target the exchange rate for competitive purposes. These commitments, originally announced in February, helped bolster market confidence and support financial market stability at a time when concerns about the global economy were on the rise.
China committed to step up its efforts to rebalance its economy toward household consumption and services while ensuring investment is high quality and driven by the private sector. For the first time at the S&ED, China agreed to better align the incentives of all levels of government to support household consumption. And in the short-term, China said it stands ready to complement these reforms and has adopted more proactive fiscal policies to expand domestic demand.
In an effort that will allow Chinese policymakers, the corporate sector, and financial markets to better understand economic developments, China has committed to improve economic data and transparency. Given that China is one of the world’s two largest economies and the largest trading nation, this will also promote better understanding of global economic developments.
We welcome China’s commitment to undertake further steps that would enable its steel industry to be more responsive to market forces and in doing so, progressively reduce its excess production capacity. To this end, China has committed to ensure that its central government policies and support do not target the net expansion of steel capacity; and to actively and appropriately wind down “zombie enterprises” through a range of efforts, including restructuring and bankruptcy. China has also committed to participate in the international community’s efforts to address excess capacity at the OECD and to engage with the United States on a potential global steel forum. While regrettably we were not able to come to common understanding of the global aluminum excess capacity situation, the United States and China will continue to hold discussions on excess capacity in this important sector.
With regard to the financial sector, China committed to deepen reforms, including specific steps that will expand access for U.S. financial services firms, legal and corporate reforms which will foster institutional investors, and financial regulatory reforms consistent with international standards. These reforms will help U.S. investors to participate in China’s financial markets and contribute to global financial stability.
Building on President Xi's visit to Washington last fall, both sides agreed on a policy framework for the private sector to enhance RMB trading and clearing capacity in the United States. This will support the competitiveness of the U.S. financial and corporate sectors and improve U.S. investors' access to China’s onshore capital markets. China announced an initial RMB Qualified Institutional Investor quota of 250 billion RMB – which is $38 billion – for the United States, the largest in the world after Hong Kong. China’s commitment to designate RMB clearing banks in the United States will provide an additional mechanism for clearing RMB alongside correspondent bank relationships.
We welcome China's engagement in the Paris Club, recognizing its place as the principal international forum for restructuring official bilateral debt. The Paris Club needs to keep pace with the changing landscape of official financing, including by expanding its membership to include emerging creditors such as China. We look forward to China's continued engagement in the Club, including further discussions on potential membership.
On Export Credits and enhancing the effectiveness of the International Working Group on Export Credits, China and the United States agreed to seek reforms to the IWG structure including the appointment of a Secretary General. Importantly, China committed to providing the IWG with comments on tabled “horizontal” guideline text at the Fall IWG meeting. These steps will help to advance progress on developing new international export credit guidelines.
We are also pleased with China's commitments to reform its biotechnology review process to make it timely, transparent and science-based. China also committed to engage in a dialogue by year-end on the impacts of its asynchronous review system. While this is substantive progress, we continue to have differences with China on biotechnology. We look forward to further dialogue to resolve these differences and to ensure the smooth flow of trade in innovative biotechnology.
We recognize the important steps that China’s leaders have taken and strongly urge them to follow through on the commitments they have made. While such progress is commendable, there is still more work to do. American companies operating in China have expressed growing concerns about the business climate and it is important that our two countries continue to engage with one another and our respective business communities to resolve these concerns.
We also look forward to continuing to work together on many of the issues we discussed as we head into the G-20 Leaders Summit that China will host in Hangzhou in September. While efforts over the past several days cannot resolve our concerns, they do represent real progress that will create opportunities for U.S. workers and companies in a growing Chinese market.
Finally, I want to thank the delegations on both sides for their candor and openness during our conversations. Clear communication is critical for a successful bilateral relationship and I want to personally thank Vice Premier Wang for his leadership during these discussions not only this year but throughout the entirety of our relationship.
Not only has Vice Premier Wang been a constructive and frank partner and an advocate for his country and for the U.S.-China relationship, we have become friends. And it is that friendship that has allowed us to work candidly together on tough issues. I look forward to working with him to ensure that the meeting between our two presidents in September is a success.
Thank you very much.
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