Divergence over South China Sea
Print Edition
THE United States and China sought to stress the positives in their relationship yesterday after three days of high-level talks, but they failed to narrow differences on the most contentious issues of cyber and maritime security.
At the end of the US-China Strategic and Economic Dialogue in Washington, US Treasury Secretary Jack Lew said both sides had committed to work more toward a Bilateral Investment Treaty already seven years in the making.
China had pledged to limit intervention in currency markets to manage the yuan’s value except in situations of “disorderly market conditions.”
It also pledged to further liberalize exchange rates, open capital markets and expand access to foreign financial service firms.
China agreed “to actively consider” additional steps to move the yuan, which the US has long criticized is forcefully kept undervalued, to a market-based exchange rate.
Washington appeared more ready to support a major step in the internationalization of the yuan, its inclusion in the basket underpinning the International Monetary Fund’s SDR currency. But there was little sign that Washington was ready to embrace the new Asian Infrastructure Investment Bank.
Lew welcomed China’s commitment to begin publishing economic data to meet a key IMF standard by the end of 2015.
“It is in China’s own interest to adopt the transparency standards of major reserve currencies,” Lew said.
Earlier this year, Beijing asked the IMF to consider including the yuan in the basket on which the SDR is based. That would constitute a major recognition of the yuan as one of the 10 most important currencies in the world.
Chinese Vice Premier Wang Yang confirmed that Washington had shown support for the yuan’s consideration by the IMF, a decision likely to take place next year.
Wang also said the two sides had placed a high priority on the Bilateral Investment Treatty, as they weighed each other’s proposed “negative list,” a register of business sectors that both sides would want to keep protected from foreign investment.
The two sides had committed to “improve the negative list offer with a view to reaching a mutually beneficial and high-standard treaty,” he told reporters after the meeting.
The talks, which deal with a broad range of often technical issues, appeared to avoid flashpoint economic issues, such as the AIIB and the Trans-Pacific Partnership, the US-driven free trade area that notably excludes China, the second-largest US trade partner.
A key new complaint at the top of the US list in economic and trade issues, cyber-spying and cyber-theft of secrets and intellectual property from US companies was discussed, according to Lew.
The two sides “had candid conversations about standards of behavior in cyberspace. We agree that there is value in bilateral and international cooperation on these issues.”
The two countries also stressed cooperation in combating climate change, concerns about Iran and North Korea’s nuclear programs, the fight against Islamist militancy, and support for global development.
However, in what both termed “candid” and “frank” exchanges at the annual talks, they restated divergent positions on issues of the South China Sea and cybersecurity, the principal causes of deteriorating trust between the world’s two largest economies.
US Secretary of State John Kerry told reporters the US remained “deeply concerned” about cyber incursions.
He said it also had “a strong national interest” in freedom of navigation and overflight — a reference to concerns that China might one day declare an exclusion zone around reefs it has been building up in the South China Sea.
China’s top diplomat, State Councilor Yang Jiechi, said the two countries should work together on cybersecurity and called on Washington to be “impartial and objective” when it came to the South China Sea.
He said China had stressed its “firm determination” to safeguard its sovereignty and urged the US to respect this.
However, Yang added: “Navigation freedom in the South China Sea is guaranteed. We do believe that there will not be any issue or problem with navigational freedom in future. We hope the US can be impartial and objective to serve peace and stability in this region.”
President Barack Obama met Yang and other Chinese officials earlier and raised concerns about China’s “cyber and maritime behavior” as well as its currency, technology and investment policies.
Obama’s policy of pivoting US resources to Asia in response to China’s rapid rise got a welcome boost on Wednesday, when the Senate passed legislation vital to speed passage of a 12-nation Trans-Pacific Partnership trade deal under negotiation after a six-week congressional battle.
Kerry sought to play down any notion of what many analysts see as a rapidly deteriorating US relationship with China.
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