June 2, 2009
Geithner Softens Tone in Approach to Beijing
By DAVID BARBOZA
BEIJING — In his first visit to China as Treasury secretary, Timothy F. Geithner seems to be taking a new approach to dealing with China.
With the global financial crisis reverberating, Mr. Geithner is applauding Beijing’s efforts to stimulate its economy, trying to lay the foundation for future negotiations and promising that the United States will press for China to have a bigger role in the management of the global economy.
He is also trying to address the concerns of some Chinese officials and economists about the soaring American budget deficits and their potential impact on the value of Treasury notes. China is now the largest holder of United States government debt.
“We will cut our fiscal deficit; we will eliminate the extraordinary governmental support that we have put in place to overcome the crisis,” Mr. Geithner said in a speech at Peking University on Monday. Later, when asked by a student whether China’s investment in American assets was safe, he said, “Chinese financial assets are very safe.”
Analysts say Mr. Geithner’s three-day visit, which ends Tuesday, after meetings with President Hu Jintao and Prime Minister Wen Jiabao, signals a shift in relations between the United States and China. The Obama administration appears determined to make China a more equal partner and Mr. Geithner’s tone this week has been soft and conciliatory.
The Bush administration maintained solid relations with China. But Bush administration officials regularly pressed Beijing to crack down on the counterfeiting of American software, movies and pharmaceuticals, and to allow American banks and investment banks greater access to the Chinese market.
Trying to prevent Congressional Democrats from passing legislation intended to punish China for “manipulating” its currency, and thereby exacerbating huge American trade deficits, Bush administration officials pushed China to allow its currency to appreciate against the dollar, hoping that might slow the growth of Chinese exports to the United States.
Mr. Geithner’s trip seems geared more toward winning the confidence of Chinese leaders. He is emphasizing mutual respect and trying to ensure that Beijing does not sour on the dollar or stop buying Treasury notes.
C. Fred Bergsten, director of the Peterson Institute for International Economics in Washington, said American relations with China had intensified and strengthened in recent years, growing increasingly important as the two nations recognized the need to try to solve global problems together. The Obama administration’s more conciliatory approach may represent a new kind of diplomacy that has emerged in the wake of the financial crisis, he said.
“I suspect part of what you’re seeing with Geithner is a change in style,” Mr. Bergsten said in a telephone interview on Monday. “Maybe he’ll raise some of these issues, like piracy and exchange rate reform, more quietly, and that may be more effective.”
Mr. Geithner also said Monday that he was pressing to make the International Monetary Fund and other international financial institutions more representative; China, in other words, should play a greater role in helping to manage the global economy.
In recent months, Mr. Wen and some leading Chinese economists have scolded American policy makers, expressing worries that the Obama administration’s plans to run up huge deficits would eventually weaken the dollar and diminish the value of China’s holdings in Treasury notes.
Some issues Mr. Geithner has raised with Chinese leaders this week are familiar. He said that the United States and China must each help to rebalance growth; that Americans should consume less and save more; and that China should save less and consume more.
Mr. Geithner is also discussing climate change issues in Beijing, pressing for greater cooperation and also encouraging China to use American technology to deal with environmental problems.
But Mr. Geithner’s language and tone appear decidedly gentler. And Bush administration statements about what China needs to learn from Wall Street have been replaced by acknowledgments of China’s relative economic well-being. “China,” Mr. Geithner said, “despite your own manifest challenges as a developing country, you are in an enviably strong position.”