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Communist Party of China CPC>>News
08:31, September 25, 2010

Premier puts forward proposals for closer China-U.S. ties
Visiting Chinese Premier Wen Jiabao put forward a package of proposals here Wednesday as part of the efforts to ensure that China-U.S. relations move forward on the right track and toward a better future.

Wen hailed the development of the China-U.S. ties over the last 10 years, which witnessed the steady improvement and continuous deepening of relations. He said that the two sides should boost strategic mutual trust, respect each other's interests, strengthen mutually beneficial cooperation, and expand people-to-people exchanges.

In a speech entitled "To Create A Bright Future for the China-U.S. Relations Jointly in the New Era," while addressing a night banquet held in his honor by some U.S. friendly organizations, Wen confirmed by facts and figures that China is still a developing country, and reiterated that China's basic policy of economic reforms and opening-up remain unchanged and will never chance, and that China will stick unremittingly to the pursuing of peaceful development as it bears on the fate of the nation.

He also touched upon some hot issues concerning China-U.S. relations, including China's trade surplus, the exchange rate of China's yuan, and China's investment environment at the banquet hosted by the National Committee of U.S.-China Relations and the U.S.-China Business Council.

U.S. Secretary of Commerce Gary Locke and former Secretary of State Henry Kissinger were present at the banquet.

CHINA NEVER PURSUES SURPLUS IN TRADE

China has never pursued surplus in trade, and the trade surplus is not to blame for high U.S. jobless rate, Wen said.

The interests of both China and the United States are not limited to commodity trade alone, but cover two-way investment, service trade and other areas of economic cooperation, he said.

China enjoyed consecutive trade surplus only after 1994 and in most of the years, trade surplus accounted no more than 3 percent of China's Gross Domestic Products (GDP), the premier said.

China started to turn to boosting domestic demand and increasing imports to solve the problem very early, and has recently launched an unprecedented stimulus program to bolster domestic demand, he said.

China's trade surplus dropped by 34 percent in 2009 from the 2008 level, and was down 42.5 percent during the first half of 2010 on a year-on-year basis, Wen said, adding that it now accounts for 2.2 percent of the GDP, which is at a reasonable level by world standards.

He noted that China's trade surplus over the past decades came mostly from processing trade and foreign-owned enterprises including U.S.-owned firms, which were the main beneficiary of China's export growth.

The current high unemployment rate in the United States was not caused by China's trade surplus, the premier said, because most Chinese exports to the United States are labor-intensive or low added-value products U.S. manufacturers no longer produce.

To address the Sino-U.S. trade imbalance, the two nations need to work together and place the issue into a global and multilateral context, he said.

China will continue to increase imports from the United States. At the same time, the United States should recognize China's market economy status and ease control over exports to China so as to promote free trade, Wen said.

He noted that there are nearly 60,000 U.S. investment projects in China. In 2008, U.S.-owned enterprises in China reported 146.7 billion

U.S. dollars in total sales, 72.2 billion dollars in exports and nearly 8 billion dollars in total profit. China is now one of the biggest holders of U.S. Treasury bonds and China's investment in the United States has been growing rapidly, Wen said.

DRASTIC CURRENCY APPRECIATION GROUNDLESS

Wen said the exchange rate of the yuan is an economic issue that should not be politicized.

Some people have linked the yuan exchange rate with China's favorable balance of international trade, saying China keeps the level of the Chinese yuan low to gain a competitive edge.

However, Wen said, there is no natural link between the exchange rate and a favorable balance of trade.

For example, the United States had maintained a trade surplus for more than 90 years, from the 1870s to the 1970s, but later trade surplus turned into growing trade deficit since then. Such a change was obviously not caused by exchange rate fluctuations, Wen said.

China had maintained a favorable balance against the United States and the European Union, but had a trade deficit with Japan and South Korea, an indication that trade imbalance between the two countries could not be explained by the level of the yuan exchange rate, Wen said.

He said China had always taken a highly responsible stance on the issue of the yuan exchange rate, which should be viewed in a historical perspective.

According to statistics based on the exchange rate index of the Bank for International Settlements, the yuan had appreciated by a massive 55.2 percent since January 1994 as of July this year, he noted.

Meanwhile, major currencies of the world had depreciated, with the U.S. dollar dropping 2.5 percent, the euro 3.8 percent and the Japanese yen 19.5 percent.

Following the latest global financial crisis, the currencies of many countries witnessed drastic depreciation.

During the same period, the yuan had remained basically stable, which contributed greatly to stabilizing the international financial situation and promoting a world economic recovery, Wen said.

The yuan had seen increased flexibility since June 19, when China launched further reforms of the yuan exchange rate mechanism, he said.

Wen said China had made active efforts while still facing great difficulties and a drastic appreciation of the yuan has simply no ground.

Reforms on the exchange rate, which was in accordance with China's long-term and fundamental interests, would continue, he said.

Meanwhile, China would also launch structural reforms in an active and effective way to expand domestic demand, particularly household consumption, and to promote a sustainable balance of payments, Wen said.

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