US Secretary of the Treasury Beijing
Thank you very much Mr Ambassador. Thank you very much for all your kindness and hospitality during our visit. The ambassador and I have been spending a great deal of time together, as we have called upon the economic and political leaders of your great country.
Let me say that we have had a series of very good meetings, very important meetings and, to me, very encouraging meetings. So, let me begin by thanking my hosts for inviting me to Beijing and my colleagues from the Treasury Department to discuss issues of mutual interest to our two countries. (6) I’ve been to China many times in the past in a private capacity, as a businessman. This is my first opportunity to be here in my new capacity as a representative of the United States government. I want to state how much I appreciate the hospitality, the warmth and the friendship that have been extended to us, to me and to the Treasury delegation, throughout the course of our discussions. I’m honored this afternoon to have the opportunity to continue those discussions with the premier, with Premier Wen. In all of these discussions I have found the Chinese leaders open, frank and encouraging of the close ties and the close working relationship between our two countries.
When President Bush visited China and met with President Jiang Zemin, President Bush said, and I want to quote him here because I think his quote sets the foundation for this relationship. He said, “China and the United States, both with significant influence in the world, should step up dialogue and cooperation, properly handle their differences, and work together to move the constructive and cooperative relations between us further forward.” Our talks this week are fully in keeping with the spirit of President Bush’s comments.
It’s been our view for some time that the best international economic system’, the best for China, and the best for the United States, and the best for the whole trading world is one based on the principle of free trade, open markets, free capital flows, and market-based exchange rates, among the major economies. China is now clearly one of the major economies of the world. It’s with these principles in mind, these ideas in mind, that I am here to discuss our economic relationship with the Chinese leaders and to encourage China to continue to take advantage of its strong growth to accelerate progress in all of these areas. The growth which China has enjoyed makes it easier to move further in the direction of open markets and floating exchange rates and free capital flows and to advance these ideas within the economy of China for the benefit of the Chinese people. Another area that is important is the free flow of capital. The free flow of capital is a fundamental component of our global system of international trade and international finance. While I applaud and welcome the recent policy changes that allow for greater capital mobility, it’s in China’s interest to accelerate these efforts. For example, it would be beneficial to expand the qualified institutional investor programs, to increase both portfolio inflows and portfolio outflows. It would also be advantageous to liberalize the long-term debt transactions, and overall to create open capital markets. As we talked to the Chinese economic leaders, we emphasized over and over the necessity to develop open capital markets. They really are the key to the success of a market-based economy. Finally, let me turn to the subject of exchange rates, because the subject of exchange rates has also been much in discussion among us. The establishment of flexible exchange rates, of a flexible exchange rate regime, would benefit both our nations as well as our regional and global trading partners. Market-determined floating currencies are really the key to a well-functioning international financial system. For the world’s major traders, only freely floating currencies bring the accuracy and the efficiency necessary for the proper pricing account settlement in capital flows. That’s really our central point, that floating rates, market-based, flexible exchanges create the signals for a well-functioning flow of resources on a global basis. There’s ultimately no substitute for that. We’ve learned over the years that rigidities of all kinds, including rigidities in exchange rate mechanisms; tend to distort the proper functioning of markets. Open competitive markets with little or no interference are essential. They are really needed to insure that people and investment capital can seek out the best ideas and opportunities. How do economies grow? How do they prosper? They grow and prosper by bringing people with ideas together with people with capital. Then, we can see those ideas flower in the marketplace, with new products and new services.
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