Paulson Addresses “New Dynamics” In U.S.-China Relationship

Global Business News

<!–TR>

<TD width=300 vAlign=top–>

10/23/2007 10:49:19 AM The shifting relationship between the U.S. and China, including protectionism and currency value, was the focus of Treasury Secretary Henry Paulson’s speech at a U.S.-China relations conference Tuesday. He stressed the need for “bilateral cooperation” as globalization and interdependence continue to define the global economic landscape.“There is hardly an issue – from trade, to national security, to climate change – or a place – from North Korea to Iran to Sudan – where American and Chinese interests do not increasingly overlap,” Paulson said, emphasizing the growing inter-reliance.

Paulson made no bones about the fact that the U.S.-China relationship is complex and historically strained. However, looking forward he discussed the United States’ role in what he termed the “re-emergence of China.”

Specifically, he cited the growth of U.S. exports to China, which have grown five times faster than U.S. exports to the rest of the world. Additionally, Paulson pointed out that China is now the United States’ fourth largest export market.

“U.S.-China economic interdependence is deepening,” Paulson told the audience.

The United States is not the only nation affected by China’s substantial growth, Paulson said. China is now a major player and maintaining a strong relationship with the United States and other major economies is essential to stability in the global system.

“Because China is now integrated into the global economy, what happens in China’s economy affects the entire international community,” Paulson stated. “The U.S.-China relationship has become central not only to each nation’s interests, but also to the maintenance of a stable, secure and prosperous global system – which benefits the world.”

One of the more sensitive issues is how China will meet their expanding energy demands in an environmentally considerate manner. China and the United States are similar with respect that they are the two largest energy consumers in the world, and as a result they emit the most greenhouse gases. Paulson reminded the audience that environmental protection is a global goal, not restricted to individual countries. “What happens with China’s environment impacts all nations,” he said. “Air and water know no boundaries.”Consumer safety with regard to the recent wave of recalls of Chinese-made products has cast a shadow over China’s exports.

“American consumers have very real concerns about the safety of food and product imports from China,” Paulson said. “Recent and repeated reports of tainted food and product imports are causing fear and uncertainty in American consumers and harming the “Made in China” brand here in the United States.”

Increased communication to confront the new dynamics of the relationship – “deepening interdependence, a strained policy consensus, and the rise of economic protectionism” – was the cornerstone of Paulson’s speech. He was very direct about the importance of continued cooperation.

“Solidifying these habits of cooperation is critical to sustaining America’s broader China policy, both at home and abroad,” he stated. “A weak and insecure China is not in America’s economic or security interests.”Of the three new dynamics, the protectionism movement in China is what Paulson considers the most dangerous to continued growth.

“In my judgment, the greatest risk to China’s long-term economic security is that protectionists prevail,” he cautioned.

Paulson also forced the issue of currency appreciation, which has come under fire in the United States Congress and in the 2008 presidential race. Many believe that China is keeping its currency devalued, allowing cheaper exports and inhibiting other countries from importing products.

“Currency appreciation to date has not slowed the Chinese economy,” Paulson stated, addressing Chinese concerns that valuing the yuan would harm the economy in the long run.

He added that allowing the yuan to strengthen at a faster rate would be an important and necessary step in an effort to implement a “fully market-determined currency in the medium term.”

“Accelerating the rate of appreciation and introduction of flexibility will help China deal with the imbalances that have grown in the economy and make monetary policy much more effective in responding to inflation,” he told the audience.

China Outsourcing Advice

Linking East and West, BaySource andEastlink Global Ltd represents a “safe pair of hands” for companies looking to do business in Asia today. Focused on innovative new products and manufacturing components, Eastlink Global is committed to building long-term partnerships with industry-leading companies who share our values of integrity, transparency and uncompromising customer service.In Asia today “Everything is possible… yet nothing is easy” however, our on-the-ground team is dedicated to providing the day-to-day execution needed to ensure your company’s success. Our extensive manufacturing networks, design engineering, program management capabilities and robust logistics infrastructure provide the “end-to-end” solution needed to win in today’s fast-paced environment. Partnering with BaySource and Eastlink Global allows you to instantly unlock the opportunities and benefits of working in Asia, optimizing cost savings and mitigating execution risk. Allow us to help navigate your next outsourcing initiative here in Asia.  www.baysourceglobal.com