Geithner: China backs efforts to fight downturn

The global economy is showing "early signs of stabilization" due to action by the United States and China to end its worst slump in decades.

Timothy Geithner pink 88 248 (photo credit: )
Timothy Geithner pink 88 248
(photo credit: )
The global economy is showing "early signs of stabilization" due to action by the United States and China to end its worst slump in decades, US Treasury Secretary Timothy Geithner said Tuesday. The two governments announced they would launch new high-level talks the week of July 27, reviving a dialogue carried on under the former US administration and broadening the agenda to include foreign policy concerns. Geithner said that in two days of talks, Chinese officials recognized the need to move aggressively to revive growth and stabilize the banking system even at the cost of higher US government budget deficits. "I think we've already demonstrated the capacity of our two countries to work together on the global stage to lay a foundation for economic recovery," Geithner said in a meeting with President Hu Jintao as he wrapped up his visit. "And I think partly because of the strengths of the actions put in place by your government and by President Obama we're starting to see some early signs of stabilization and recovery in the global economy." China is the largest owner of US Treasury securities and Geithner assured Chinese leaders that President Barack Obama was committed to tackling soaring budget deficits that have stirred unease about the value of Beijing's holdings. Premier Wen Jiabao roiled financial markets in March when he expressed concern about the safety of China's holdings of US government debt. In the public part of a meeting Tuesday with Geithner, Wen made no mention of the comments, which had raised worries over rising US budget deficits and possibly higher interest rates that might choke off a recovery in the United States. The reception Geithner received seemed to show that the governments of the world's largest and third-largest economies were determined to cooperate to combat the downturn. Hu thanked Geithner for developing good relations with his Chinese counterparts and taking action to end the financial crisis. "What I sense is a fair amount of confidence in the dynamism of the US economy, that we will solve this crisis and go back to living within our means," Geithner said in a meeting with reporters. He delivered the same message to Chinese media. The treasury secretary said he assured Chinese officials that the administration was determined to bring down deficits once the crisis has passed. "We are very committed to make sure that when recovery is established, that we go back to living within our means, that we bring our fiscal deficits down to a sustainable level, that we unwind and reverse these exceptional measures that we've taken in the financial sector," Geithner said in an interview with Chinese state television. In an interview with the China Daily newspaper, Geithner praised the actions taken by the Federal Reserve. Geithner said Fed Chairman Ben Bernanke had done an "enormously impressive job in the worst financial crisis in decades." Chinese officials did not comment publicly on Geithner's reassurances. China owns $768 billion of Treasury securities, about 10 percent of America's publicly held debt, making China America's largest creditor. The Obama administration has projected that its aggressive moves to fight the downturn with a $787b. economic stimulus program and shore up the banking system with a $700b. bailout fund would push this year's budget deficit to $1.84 trillion, four times the previous single-year record. Geithner insisted in his interviews that recent increases in the interest rates investors were demanding to hold US Treasury securities were not a sign of investor unease but a reflection of improving economic conditions. On Monday, Geithner met with Vice Premier Wang Qishan to discuss upcoming talks in Washington. They are to be led on the US side by Geithner and Secretary of State Hillary Rodham Clinton. Geithner stressed during his visit that the Obama administration was interested in forging a cooperative relationship with China. He emphasized areas of agreement and played down disputes over trade and currency.