CHENGDU, China – Chinese Vice Premier Wang Qishan warned yesterday that the global economy was in a grim state while the visiting US commerce secretary said China would be spending US$1.7 trillion on strategic sectors as China seeks to bolster waning growth. Wang said an “unbalanced recovery” may be the best option to deal with what he had described on Saturday as a certain chronic global recession, suggesting China would boost its own economy before worrying about global imbalances at the heart of trade tensions with the United States.
“An unbalanced recovery would be better than a balanced recession,” he said at the annual US-China Joint Commission on Commerce and Trade, or JCCT, in the southwest city of Chengdu.
The comments, echoed by Vice Finance Minister Zhu Guangyao, stopped short of suggesting China would try to boost exports as it had done during the 2008-2009 global financial crisis when it pegged the yuan to the dollar.
Instead, US Commerce Secretary John Bryson told reporters that China had confirmed to US officials that it planned to spend US$1.7 trillion on strategic sectors in the next five years. The government has previously said these sectors include alternative energy, biotechnology and advanced equipment manufacturing, underlining its aim to shift the growth engine of the world’s No. 2 economy to cleaner and high-tech sectors. The investment amount of 10 trillion yuan (US$1.7 trillion) is more than twice the 4 trillion yuan stimulus package launched during the global financial crisis.
“Global economic conditions remain grim, and ensuring economic recovery is the overriding priority,” said Wang, the top official steering China’s financial and trade policy, at the start of the second day of talks with the US. “As major world economies, China and the United States would make a positive contribution to the world through their own steady development,” Wang told trade, investment, energy and agricultural officials from each government.
Yesterday, Singapore and Thailand said their economies would shrink in the fourth quarter and Japan posted a bigger than expected fall in October exports. Some central banks, including those in Brazil and Indonesia, have cut interest rates.
On Saturday, Wang gave the most dire assessment on the world economy from a senior Chinese policymaker to date. “The one thing that we can be certain of, among all the uncertainties, is that the global economic recession caused by the international financial crisis will be chronic,” he was quoted as saying by Xinhua news agency. US officials said yesterday the discussions yielded progress on the question of “forced” technology transfers to Chinese companies, long a sore point for US businesses. In particular, China committed not to require foreign automakers to hand over new energy vehicle technology to Chinese partners, or to establish Chinese brands as a condition for market access, said US Trade Representative Ron Kirk. “China also confirmed that foreign-invested companies will be eligible on an equal basis for any subsidies or incentive programmes for electric vehicles,” he said.
Although the JCCT talks do not address exchange rate policies, US officials at the talks told Wang and his colleagues that they could not ignore rising “American impatience” with China’s trade policies and investment barriers. However, Zhong Wei, an economist at Beijing Normal University, said the benefits to the US of yuan appreciation “are nearly zero.” “Cheap Chinese goods have been a subsidy for the poor in the US, and now the US government wants to eliminate such subsidy while it’s having difficulty creating jobs.”