QUESTION: Madam, the annual dialogue is over, so what can you tell us what we accomplished this time?
SECRETARY CLINTON: Well, Mr. Yuen, let me start by expressing deep appreciation for these dialogues. For the last three years, as you know, we have held them – two in Washington, one in Beijing – next year we will be Beijing again. And there are very specific outcomes, agreements that are signed, particularly on promoting scientific research, on improving our cooperation in everything from clean energy to agricultural productivity. On the economic side, similarly, a lot of progress in making sure that Chinese businesses in the United States and American businesses in China have a chance to invest and compete.
But in addition to the specific outcome, what I am particularly pleased about is I believe we have developed greater understanding of one another and more trust. Ever since President Obama came into office, he and I have said that we support China’s successful rise. We think a successful, thriving China is good for the United States. We will have differences and disagreements. We are two very different people, and we have different histories. But overall, I think we have charted a very positive path forward.
QUESTION: You – I watch you at the – on the opening day, your speech. You keep on saying that we have to build up the mutual trust between our two countries. So after this meeting, after the two previous meeting, do you think we already build up those kind of trusts you’re trying to achieve?
SECRETARY CLINTON: I believe we have. And I think from the comments of my Chinese counterpart, State Councilor Dai Bingguo as well as Secretary Geithner and Vice Premier Wang, we all feel that we have delved into these issues quite deeply. And we have been willing to express to one another what we don’t understand – Why do the Chinese people feel this way; why do the American people do that?
And during the course of my extensive meetings in the strategic track, I think we have crossed a bridge so that we are willing to discuss at great length difficult, sensitive matters. In fact, for the first time ever, we had a special meeting that included military and civilian officials talking about strategic security issues. We don’t want misunderstanding and miscalculation. Where we have a difference, we want to be very clear about that difference so that there’s no confusion. And I think that creates a greater level of both understanding and trust.
QUESTION: So this morning I read all the major newspapers in this country. Essential to them, and I think as well as in China – they all focus on this is first time the military ranking – high-ranking military office meet each other. Is this a special meaning for us in the future?
SECRETARY CLINTON: I think it’s a very important development, because we want to be sure that as our governments on the civilian side take the time to really listen to each other, we do the same on the military-to-military side. We know that China has such tremendous potential, not just economically but also militarily. And we want to avoid miscalculation there as well. From the report that State Councilor Dai Bingguo and I received from the two leaders of the strategic security dialogue, it seemed as though they had quite a satisfactory conversation. It’s just a beginning, but one has to start somewhere, because we want to make sure that there are no surprises, there is an understanding of the positions that each of us takes, and where there can be cooperation we pursue it.
For example, one of the issues we’re beginning to discuss is with respect to disasters. We’ve had some terrible natural disasters in East Asia, earthquakes in China, Japan, New Zealand, flooding, terrible storms. And one could perhaps argue that the disasters are more intense because of changes in weather patterns. So how do we jointly plan on that? And I think both of use a combination of civilian and military resources.
SECRETARY CLINTON: So here’s an area where perhaps we can cooperate.
QUESTION: How about the (inaudible) of military exercise? Are we going to have – in the future, we have agenda or schedule to make the joint military exercise together?
SECRETARY CLINTON: I think certainly that could be on a future agenda, that there would be an opportunity to discuss that. But we had to start, and I think that was a good start today.
QUESTION: So for the past few years, I keep on listen – watching your speech. You’re always trying to convince Chinese people and government that United States not going to contain China. From your experience when you talk to those Chinese officials, are they being convinced by this?
SECRETARY CLINTON: I think that there’s a lot more understanding and confidence in our intentions and our action. State Councilor Dai Bingguo and I had a very interesting conversation, because he was explaining to me some of the many reasons why he believes that China should not fear the United States and why the United States should not fear China. I agree with that. But we are both large, complex countries, and we have many voices and many interests. We know that China has done a tremendous job in the last 40 years in lifting people out of poverty. We think that’s good for us, so we want to see that continue. At the same time, we want to see China’s economic system and its market become more open.
So we talk about that, and I know China doesn’t want to do anything that in any way interrupts the peaceful rise and the development of the Chinese people. But we make the case that opening up one’s market will actually benefit people. Well, so we have our point of view; the Chinese express their point of view, but that should not be viewed as any kind of interference from either side. We want to just put out all of our observations, and each country is, of course, always having the right to choose one’s own course.
We talk very, very openly about the problems that we’ve got in our economy and our political system that we have to pay attention to, and why, when we have economic problems, there is naturally going to be some concern on the part of some Americans about China’s economic success. So we try to make sure that everybody understands the different point of view.
QUESTION: In the past few years in that program, I was convince – try to convince the Chinese people, saying that criticize always come from good friends. You don’t think, this president is my good friend; I don’t try to criticize him, I don’t – I just want to – so we’re basically – so did you try, from your part, to convince Chinese people, hey, look, I am – you’re a good friend, so I criticize you?
SECRETARY CLINTON: Well, I think you’re right. I think that if you are indifferent to someone, you don’t even worry about that person. You could care less. You don’t want to have anything to do with them. I am very committed to our relationship, not only our government-to-government relationship but, even more importantly, our people-to-people relationship. And I think it’s gone in a very positive direction in the past years.
But at the same time, we have internal opinions, values, interests, just like China does. So we will say we’re not always going to agree, and we do have some questions and some criticism, which we’re happy to share with you in the hope that you will better understand us and maybe it will give you some ideas.
And I remember my first trip to China as Secretary of State. It was in the midst of the financial crisis. And Chinese friends had many critical things to say about our regulatory system, our economic system. And it was good not to pretend otherwise but to say, how did this happen, why did this happen, what are you going to do to fix it. So we’ve had, I think, a very good and friendly exchange.
Now, sometimes the media paints it as something other than part of the ongoing dialogue. And what I have told Americans is we will, for example, raise questions about human rights, but that doesn’t prevent us from working on critical issues that will determine the quality of life that people lead. How do we keep our economies growing? If the United States and China don’t cooperate, the world will suffer. How do we deal with climate change? How do we deal with energy? How do we deal with all of these issues – food security, clean water – which are critically important to the people that we both represent? So it’s not either/or. It’s a combination. It is, as both President Hu Jintao and President Obama said, we want a positive, cooperative, and comprehensive relationship.
QUESTION: I remember when once I read an article from your New York Times. It says you consider China as a banker, banker of United States. So you always trying to make this banker build up a closer relationship between United States and the banker. So for the past years, do you think we approach closer?
SECRETARY CLINTON: I do. And I remember when I said that. It was back in my campaign for president. And that was a criticism of my own government and my own political system; that when my husband left the presidency, the United States had a balanced budget and a surplus, and we were on a path to financial independence. For many reasons, at this point in time, we are deeply in debt, we run big deficits, and it’s deeply disturbing to many Americans.
So what I was pointing out is that we had, in effect, not just to China – we have Japan, European, we have many countries that have faith in the American economy and have bought American debt, but I prefer that we be more independent. I think it’s a better path for a nation. That’s not a reflection on our respect for China or Japan or Europe or anyone else.
So that was actually a criticism of my own country, but I think you are right to point out that we have worked hard in the Obama Administration to avoid what could have been an awkward relationship, where we were in a very difficult economic position and we did owe a lot of money to China, and we did have to figure out how to get the global economy going. And I really give both President Hu Jintao and President Obama a lot credit, because it could have been easy for Americans to overreact or for Chinese officials to say well, we’re not going to work together. But instead, they rose above the politics in both countries and they provided great leadership. And now, we are on the brink of moving away from the worst of the financial crisis which, if we had not worked together, could’ve become another Great Depression.
QUESTION: Right. One of the obstacle bothers our relationship is Taiwan –
SECRETARY CLINTON: Yes.
QUESTION: — arm sales to Taiwan. And recently, before I come here, I read an article from the – a Taiwanese newspaper saying that they are going to give up the compulsory military service in – and replace with the enlisting system, so they give money. It’s fund – allocated money into that system now, so they want to delay maybe two or three years to purchasing these weapons or the military equipment from United States. What this shows to you?
SECRETARY CLINTON: Well, I’m not aware of that recent report, but we are committed to a one China policy. And in our dialogue, I expressed respect for the way that China has been creating more positive feelings and more cross-strait economic and other activities so that the relationship between China and Taiwan, it appears, is on a much better basis. And what we have continued to stress is that we want to see an improvement in China-Taiwan relations, and it is important for both sides to work together. But our position has always been based on the three communiqués and the Taiwan Relations Act, and it has not changed and it will not change.
QUESTION: And, for example, the people in Taiwan, including Ma Ying – President Ma Ying-jeou said that according to their constitution, they’ve been already independent. They don’t have to declare independence anymore. So in this case, what’s your position, in the U.S. position?
SECRETARY CLINTON: Our position is still the one China policy, and it will remain that. Now, we don’t take a position on Taiwan elections or Taiwan political statements. That’s for the Taiwanese people. But we do believe that the more there can be cooperative arrangements, like the recent economic agreements that were reached between Taiwan and China, the better that is for everyone.
QUESTION: One last question I want to ask you, otherwise my female audience will complain. (Laughter.) They keep on asking me, said if you have chance to ask Mrs. Clinton – how do you balance your public life, a good politician, and your private life as a wife and first lady or mother of Chelsea?
SECRETARY CLINTON: Well, it is a difficult question for any woman to answer, I think, Mr. Yuen. I think that the truth is that we all balance in our own way, and it depends upon what stage of life you’re in. I will be very honest with you in saying that it would have been impossible for me to do this job if my daughter were not already an adult and now a very happily married young woman. I could not have been away as much if I had had small children. You just have to try to balance where you are in your life.
And for young women with children, I often tell them that their most important job, once they have children, is the raising of their children. I am a strong supporter of women being able to work in the workplace and being able to make good decisions for themselves. I would like to see both of our countries do more to help more women in the workplace.
But women in my lifetime have certainly seen their opportunities expand. More young women are now in positions that had never been held by women before, so more young women will be working to balance their family responsibilities with their outside requirements, whether it’s in the workplace or in some other academic or athletic or entertainment pursuit.
And I guess the final thing I would say about that is I’m a very lucky person because I have been able to practice law, to be a law professor, to be a fulltime volunteer when my husband was president, to be a senator, to be a secretary of state. And I have a great commitment to helping more women have the opportunity to make the best decisions for themselves. And one of the aspects of the dialogue is this new women leadership program that we have started, so that I will be meeting with a large number of women leaders from China and women leaders from the United States. And when women in positions of responsibility get together, we often talk about what are the tricks for balancing family and work. And I know how lucky I am that I’ve had these opportunities, but I want more women, particularly young women, to have the same choices.
QUESTION: But do President Clinton and Chelsea complain you don’t give them more time?
SECRETARY CLINTON: Well, my husband’s pretty busy too, and my daughter is very busy, so we find as much time together as possible. We have a home in New York where we love to spend time together. We were just together over the past weekend for Mother’s Day. We talk on the phone, we email a lot. And I had the wonderful experience last summer of working on my daughter’s wedding. So I will, when I retire from this position, have much more time. But right now I work for as much time together as I possibly could schedule.
QUESTION: Thank you very much, Madam. Thank you.
SECRETARY CLINTON: Thank you. It’s wonderful to talk with you. Thank you.
MR. TONER: First question goes to Matt Pennington of the Associated Press.
QUESTION: Secretary Clinton, do you think the events of the recent months in the Middle East should hold a lesson for China that eventually popular will, will challenge and bring down authoritarian governments? And did you discuss – in either your public or private discussions, did you discuss these issues with your Chinese counterparts, and how did they respond?
SECRETARY CLINTON: First, let me say that we did discuss the events occurring in the Middle East and North Africa. We exchanged impressions and views about how individual nations as well as the region is moving in the pressures for transition, for changes, for political and economic reform. Every nation and every region is different. I think it is very difficult to draw any overall conclusions. In my discussions with State Councilor Dai, I pointed out that, starting in 2002, there were a series of reports done by Arab experts about the development of that region and how it had not kept up with the rest of the world, particularly Asia.
So there was a lot of exchange of ideas, but I don’t think that you can draw any specific conclusions other than to say that the United States supports the aspirations that the people in the Middle East and North Africa have expressed for more freedom, for more opportunity, for a better future for themselves and their families, and we will continue to support the people of the region as they try to realize those aspirations during this transition period.
MR. TONER: Our second question goes to Wei Ran of Xinhua News.
QUESTION: Secretary Clinton, I appreciate for giving me this opportunity. For the Chinese side, its government has always stated that it is sticking to a policy and it will continue to stick to a policy of a peaceful development. And as we all know, that the real purpose of this dialogue, or the purpose of any dialogue, is to enhance mutual understanding and mutual trust. So when this round of dialogue concluded today, could we say that the U.S. side now have a better understanding and better recognition of China’s strategic intent? Thank you.
SECRETARY CLINTON: Thank you for the question. And I agree with you that the purpose of any dialogue is to enhance mutual understanding and mutual trust in the other. I think we’ve made quite a bit of progress in the last three dialogues. This is a work in progress. I think that for both of our nations, with such different histories, cultures, experiences, development models, political systems, it is important that we continue intensive consultations.
And as both of us have said, we do not expect to find agreement on every issue. We know that we approach some of these sensitive matters from a very different perspective than our Chinese counterparts. But I do think it is fair to say – and it’s something that Secretary Geithner said as well in his opening statement – I do think we have a deeper understanding of the viewpoint of the other. I think we have had such an open dialogue on every issue, that we have built trust because we’re not keeping any issue under the table or off the agenda. We are talking about the hard issues, and we’re developing these habits of cooperation across our government.
In addition, this is not just a task for governments. We are placing great emphasis on our people-to-people, our business-to-business contacts and experiences. I was delighted at the lunch that Secretary Geithner and I hosted for a group of American and Chinese business leaders, that they had some of the same comments, even some of the same complaints about their own and other government interference with being able to maximize their business opportunities. So I do think we are reaching a much better understanding, and I think that’s one of the principal purposes of the dialogues.
MR. TONER: Our third question goes to Howard Schneider of Washington Post. Howard.
QUESTION: Thanks. Secretary Geithner, just – I’m curious. A lot of this stuff on the economic issue seems to be kind of pressing industry by industry, market by market, around the indigenous innovation issue. And I’m wondering, are you challenging with them the sort of core logic of indigenous innovation? And if so, what’s their response on that? Are you satisfied or do you just sort of battle it out policy by policy?
SECRETARY GEITHNER: We generally try not to do it sector by sector or business by citizens. I think our approach has been to try to look at the basic design of policy across the Chinese economy. And where we see the potential risk that policy may have the effect of putting foreign innovators, foreign companies, U.S. companies, at a disadvantage, then we encourage China to change those policies and to try to pursue their objective of encouraging the development of Chinese technologies through other means. And I think our general approach on these things is to try to come at the policy at the highest level, and we think that has the most effect.
I think if you look at China and the United States, we have still very, very different economic systems; very, very different traditions of approaching economic policy. And China does still have a largely state-dominated economy, and the government plays a much more active role in the direction of the economy. The financial system, of course, is still fundamentally directed by the state. And China is at the early stages, really, even with all the reforms of the last 30 years, of making that transition to an economy where the best technology wins, where the market and competition is the driving force in allocating capital.
But they’re changing, and I think they recognize that if China’s going to be any stronger in the future, they have to increase the role for the markets, strengthen the incentives for innovation in China, and allow for a more neutral competition. And I think that’s a fundamentally healthy recognition and, as I said in my opening remarks, I think you’re seeing China move in that direction. We think the direction of policy is very promising, and we’ve very confident we’re going to see substantial ongoing improvement in the opportunities that American companies have in the Chinese market, both American companies operating in China and companies that are creating and building things in the United States.
MR. TONER: And our last question is to Li Guanyun of The 21st Century Business Herald.
QUESTION: I have a question for Secretary Geithner. Minister Chen emphasized that the United States should trade Chinese investment into United States much equally. And this afternoon, you have had a dinner with some Chinese entrepreneurs, and I know that some of them is considering to investment – investing in United States. So I mean, as this round of dialogue which United States try to trade more equally to the Chinese investment, and how do you communicate with Chinese investors if there is a (inaudible)?
SECRETARY GEITHNER: Very good question, and it was an important part of our conversations these last two days, not just at lunch. So let me just make it clear. We welcome Chinese investment in the United States, and I am very confident that if you think – if you look over the next several years, you’re going to see Chinese investment in the United States continue to expand very, very rapidly. That will be good for the United States, good for China. Of course, that’s driven by the desire of Chinese companies to have more access to U.S. technology and to try to expand their opportunities in this market, and again, we welcome that. We have an open, nondiscriminatory regime with respect to investment from outside the United States. We treat Chinese companies, Chinese investment like we treat investment from any other country, and we’re going to continue to make sure we preserve that open investment regime, because it’s very important to the basic strengths and dynamism of the United States.
Now, to be fair, we also discussed China’s investment regime, the policies China has in place to screen and limit foreign investment in the United States. And of course, although we recognize China’s interest in expanding opportunities in the U.S. market, it’s worth recognizing that China’s own investment regime is a much more restrictive regime with a much more careful management and set of limitations on the ability of foreign firms to invest and purchase stakes in Chinese companies, but that’s changing, too. And again, I think it’s in China’s interest that change over time, and I expect you’re going to see us continue to look for concrete areas where we can reassure investors in both countries that they’re going to face more opportunities on the investment side both in China and the United States.
MR. TONER: Thank you. That is, unfortunately, all the time we have this afternoon, but we appreciate your participation. Thank you.
SECRETARY CLINTON: Hello, this is Hillary Clinton.
QUESTION: Hello. Good morning, Secretary Clinton. This is Hu Shuli, Editor-in-Chief of Caixin Media. Thank you so much for giving me the precious time.
SECRETARY CLINTON: You are very welcome. I’m delighted to talk to you.
QUESTION: Great. I’m here with my colleague, Huang Shan, the International Editor of Caixin Media. Should I start now?
SECRETARY CLINTON: Yes, please.
QUESTION: Okay. First, congratulations on getting bin Ladin.
SECRETARY CLINTON: Thank you.
QUESTION: After his death, what change we should expect in U.S. global strategy?
SECRETARY CLINTON: Well, first let me say that our efforts against terrorism are going to continue, and we discussed these with our Chinese colleagues during the 3rd Strategic and Economic Dialogue here in Washington. This is a problem that everyone must remain committed to eradicating, and the United States is pleased that we have a good partnership with many countries around the world.
We will be working to build the strength of individual nations like Afghanistan to be able to combat terrorism on their own, and we will work to support others of our friends like Pakistan and African countries to be able better to withstand the pressures of extremists.
QUESTION: It seems to us the U.S.-China relations took a positive turn after September 11th, partly due to the common mission in fighting terrorists. Now bin Ladin is dead, will that incur more challenges in bilateral relations?
SECRETARY CLINTON: I don’t think so. I think that having been successful in taking steps to finally bring bin Ladin to justice is a very important milestone, but unfortunately, there are still too many people who feel that they can bring about change through violence, who seek to impose their ideology or their value system on others. So although this was an important accomplishment, it is not the end of our challenges from terrorism, and we’re going to continue to work with partners around the world to combat the violence that terrorists impose.
QUESTION: So you don’t feel that would be – make – incur more challenges in this case, right?
SECRETARY CLINTON: I’m sorry, I couldn’t hear you, Hu Shuli. I couldn’t hear you.
QUESTION: So you don’t think that bin Ladin’s death will incur more challenges in bilateral relations?
SECRETARY CLINTON: With respect to China, I certainly do not.
QUESTION: Okay. But also, there’s a common – some side of that that the ties that bind the U.S. and China are deepened today, but the scope of shared interests is narrower. What do you think on it?
SECRETARY CLINTON: I think that we have broadened and deepened our relationship. Our goal has been to build a positive, cooperative, and comprehensive relationship in which both of our nations have a very open and honest dialogue about areas where we agree and areas where we do not agree, because we think that’s going to produce more understanding and build cooperation.
So I believe that our relationship now is very solid. We are addressing so many issues together. At our just-concluded dialogue, we had many government officials from both nations, plus business leaders, plus women leaders and scientists and academics, and it was a very thorough discussion on everything from energy – clean energy to agricultural productivity to increasing people-to-people connections like more American and Chinese students studying in the other country.
QUESTION: Okay. Based on what you described and what we learned about the recent S&ED, how would this new Strategic Security Dialogue between military leaders function, and how would the consultation in Asia Pacific affairs work?
SECRETARY CLINTON: Well, first with respect to the Strategic Security Dialogue, I was very pleased that we held it for the first time this year. And it was both civilian leaders and military leaders from both of our countries sitting down across the table from each other, talking about difficult, sensitive issues. We will have differences, but what we don’t want are misperceptions, misunderstandings, and miscalculations. That’s dangerous. And therefore, we want to have as much dialogue on strategic security issues as possible, and this year we got off to a very productive start. We anticipate continuing it. I think both sides thought it was useful. And so we’re pleased by this first session.
With respect to the Asia Pacific region, both China and the United States are Pacific powers – China, on the east and the United States on the west. We both have very important interests and relationships throughout the Asia Pacific region, and we want to begin talking about how we can better understand each other, cooperate with each other, solve problems with each other. All of that will be to the benefit of both of our two countries and also to the other nations in the region who want to see China and the United States being productive together. I think it’s fair to say that with the many nations in the Asia Pacific region, they are hopeful that China and the United States will settle any differences peacefully, that we will work together on important goals like preventing or responding to disasters. So I think that it’s going to be a very positive development, and it was an idea that the Chinese side suggested and we’re happy they did.
QUESTION: Okay. Going forward, how can U.S. and China prevent some thorny issues from derailing the relationship, such as human rights?
SECRETARY CLINTON: Well, I think we have to recognize that we are two different nations based on history and experience and perspective, so we are not going to see the world the same way, we’re not going to agree on everything. That would make it very boring, I believe. So what we best can do is honestly express our opinions. Nothing is off the table, nothing is hidden; everything is to be presented and discussed. And that’s what we’ve been doing.
And so certainly from our perspective, we believe that human rights is of important interest and it’s a value of the United States. We will continue to raise it and we will listen to our Chinese partners’ responses. We will encourage progress in this area. And we think it’s very valuable to make sure that the relationship is strong and stable so that when we have areas of disagreement, which we certainly will have, that we continue our talking and our working together despite that.
QUESTION: How do you define the path of U.S.-China economic relations?
SECRETARY CLINTON: I think we have made great progress together. I personally believe that had it not been for cooperation between the United States and China, the world could have had a terrible great depression again. I think because Chinese and American leaders acted responsibly and cooperatively, we avoided that, and the world economy is slowly recovering from the very difficult times that existed when President Obama came into office.
So I believe that our economic relationship is deepening and broadening. Yesterday, we had a lunch with leading American and Chinese business leaders, and they were very open in describing to our leadership and the Chinese leadership what they thought was working and what needed to be improved. I like the level of very clear discussion and the ideas of solutions, which I think is always the best way to approach problems.
QUESTION: Okay. Thanks, Secretary Clinton. This is Huang Shan, International Editor of Caixin Media, so I’m honored to ask the last question. So the last question is simple. With respect to North Korea and Iran, did Chinese actions meet your expectations?
SECRETARY CLINTON: Well, we discussed both of those at length, as you would certainly expect, because they are serious problems. China and the United States have the same goal: We do not want to see the proliferation of nuclear weapons on the Korean Peninsula or in the Middle East. I appreciate the work that China has done with the United States in the United Nations to impose sanctions on both countries, and we are working to implement those sanctions. There is always more to be done, but we’ve made progress together.
And we are particularly focused on working with China to prevent further provocation and nuclear weapon development in North Korea. That would be extremely dangerous. So we work hard on it and we are committed to the same goal, and we must make progress together.
QUESTION: Okay. Thank you very much, Secretary Clinton, for time spent.
SECRETARY CLINTON: Thank you. Thank you both very much.
SECRETARY CLINTON: Good afternoon. I want to begin by thanking our Chinese colleagues, led by Vice Premier Wang and State Councilor Dai and the entire Chinese delegation for a productive and comprehensive dialogue between us. And I also, along with Secretary Geithner, want to thank everyone on the American side, not just those from the State Department or Treasury but indeed from across our government. The unprecedented level of involvement and the extraordinary work that has taken place since our last S&ED in Beijing was truly impressive.
The Strategic and Economic Dialogue continues to grow broader and deeper. It reflects the complexity and the importance of our bilateral relationship. And we have covered a lot of ground together, and I’m happy to report we have made a lot of progress. The list of agreements and understandings reached is quite long. We have seen concrete progress on a wide range of shared challenges, from the energy and environment to international trade and security. For example, there is now a new partnership that will bring U.S. and Chinese companies and universities together. Those which are developing innovative environmental technologies will now be working bi-nationally and with local governments and NGOs to promote sustainable development projects such as next generation batteries for electric cars, and new clean air and water initiatives. Already, Tulane University in New Orleans and East China Normal University are collaborating to improve the conservation of wetlands, and we have seen many other examples.
We are also laying the groundwork for potentially significant future collaboration on development, from working together to innovate and distribute clean cookstoves and fuels to strengthening public health systems in developing countries. And our people-to-people programs continue to expand, most notably our “100,000 Strong” Student Exchange Initiative, which has already raised the stated goal of dollars to go along with the very generous Chinese Government support for 20,000 American students because all of us are committed to increase more people-to-people interactions and opportunities. Now, I am well aware that these specific and very substantive partnerships may not produce major headlines, but I think they do reflect our shared commitment to translate the high-level sentiments and rhetoric of these diplomatic encounters to real world benefits for our citizens, our countries, and the wider world.
Just as important, although perhaps even harder to quantify, are the habits of cooperation and mutual respect that we’ve formed through these discussions. We believe that to keep our relationship on a positive path, as foreseen by Presidents Obama and Hu, the United States and China have to be honest about our differences and address them firmly and forthrightly. At the same time, we are working together to expand the areas where we cooperate and narrow the areas where we diverge. And we are building up a lot more understanding and trust. So we discussed everything, and whether it was something that was sensitive to us or sensitive to them, all the difficult issues, including human rights. And we both have made our concerns very clear to the other. We had candid discussions on some of our most persistent challenges, from addressing North Korea and Iran to rebalancing the global economy.
We agreed on the importance of cooperating in Afghanistan to advance common goals of political stability and economic renewal. We established a new U.S.-China consultation on the Asia-Pacific region, where we share a wide range of common interests and challenges. And for the first time in these dialogues, senior military and defense leaders from both sides sat down face to face in an effort to further our understanding, to develop trust, and avoid misunderstandings that can lead to dangerous miscalculations. This new strategic security dialogue is a very important step forward, and we think it will add immeasurably to our bilateral relationship.
As we have discussed these issues and as we have committed to keeping the relationship moving forward, we have some milestones ahead of us. For the first time, President Obama plans to participate in this year’s East Asia Summit. And Vice President Biden will travel to China this summer, continuing our discussions on the full range of shared regional and global challenges. And he hopes to return the hospitality by welcoming Vice President Xi Jinping to Washington at a later date. I look forward to seeing our Chinese partners at the ASEAN Regional Forum in Indonesia, and both the President and I and the Secretary are greatly anticipating the United States hosting APEC in Hawaii.
Now, those are just a few of the highlights. But day to day, at every level of our governments, we are working hard to build that positive, cooperative, comprehensive relationship that our two presidents have asked for. This is the long, hard, unglamorous work of diplomacy. At our plenary sessions that State Councilor Dai and I chaired yesterday, there was a dizzying array of issues that we are working on together, and I felt very satisfied because that was not the case two years ago. And I anticipate that we are going to see further progress, because we want to realize the full promise of our partnership, and we very fervently hope to leave a more peaceful and prosperous world for our children and our children’s children.
So let me again thank our Chinese friends for making this long journey and for working as we move forward on our journey together into the future.
Now, I am pleased to turn to my colleague and partner, Secretary Geithner.
SECRETARY GEITHNER: Thank you, Secretary Clinton. Let me outline the highlights of our discussions on the economic side.
We had a very comprehensive discussion about a full range of economic issues between us and facing the global economy. As always, we reviewed the major risk and challenges to our – to growth domestically in China and the United States, and we talked about the major risks and challenges on the global economic front. We talked about the investment climate in both countries. We talked about energy policy, financial reform – very comprehensive discussions. And we benefited on the U.S. and on the Chinese side from an exceptionally talented and very senior delegation of financial exports – experts, members of the cabinet, regulators, et cetera. And that’s very important.
Now, our three key objectives on the U.S. side were: first, to encourage the ongoing transformation of the Chinese economy away from its export-dependent growth model of the past to a more balanced growth strategy led by domestic demand; to encourage China to level the competitive playing field between U.S. and Chinese companies, both in China and around the world; and to strengthen our engagement with China on financial reform issues in both countries.
And we have made very, very significant progress in our economic relationship over the past two years. Our exports to China reached $110 billion last year and are growing about 50 percent faster than our exports to the rest of the world. And those exports are all the things Americans create and build – from agriculture, all sectors of manufacturing, services, and advanced technology – and they support hundreds of thousands of jobs across the United States.
Now, overall, we are seeing very promising shifts in the direction of Chinese economic policy. First on the exchange rate, since last June, as you know, the Chinese currency, the renminbi, has appreciated against the dollar by more than 5 percent, and at an annual rate of about 10 percent when you take into account the fact that Chinese inflation is significantly faster than that in the United States.
We hope that China moves to allow the exchange rate to appreciate more rapidly and more broadly against the currencies of all its trading partners. And this adjustment, of course, is critical not just to China’s ongoing efforts to contain inflationary pressures and to manage the risks that capital inflows bring to credit and asset markets, but also to encourage this broad shift to a growth strategy led by domestic demand.
China has outlined in its Five-Year Plan a comprehensive set of reforms, again, to shift its growth strategy away from one relying on exports to domestic demand. China has joined a broad commitment with other countries in the G-20 to put in place mechanisms to reduce the risk that we see once again the emergence of large, external imbalances that could threaten future financial stability and future economic growth.
This process is going to take time, and of course, it’s going to require a sustained effort of reform. But of course, it’s essential to the future health of the global economy and the trajectory of future growth in China. Again, we’re seeing progress here, too. If you just step back from and look, China’s current account surplus as a percent of GDP peaked at about 10 percent before the crisis. It’s now around 5 percent, and of course, we’d like to see that progress sustained.
This brings me to the third area, the third area of focus in our discussions, which is how to create a more level playing field. In our meetings over the last few days, we’ve seen some very important steps towards that goal, and let me just review a few of them. First, China committed to making long-term improvements in its high-level protection of intellectual property rights and enforcement regime to strengthen the inspection of government software and use at all levels of government. And this will help protect U.S. innovators as well as Chinese innovators in all industries, not just in software. And I think that’s very important.
China also confirmed that it will no longer employ government procurement preferences for indigenous innovation products at any level of government. And this is important to make sure, of course, that U.S. technology, U.S. firms, can compete fairly for business opportunities in China.
China has committed to increased transparency, requiring government authorities to publish regulations at least 30 days in advance, so again, that U.S. firms, all foreign firms, have the chance to see those informations – see those regulations in draft and they have the opportunity for input just as their Chinese counterparts do.
China and the United States, recognizing the importance of transparency and fairness in export credit policies, have agreed to undertake discussions on export – on the terms of our respective export credit policies. And this is important, of course, because China, by some measures, is the largest provider of export credit on – in the world.
And finally, we’ve been discussing with the Chinese authorities the important objective of how to make sure that companies in China that compete with state-owned enterprises are not put at a broader disadvantage.
The final focus of our discussions on the economic side was China’s ongoing financial reforms to create a more open, more flexible, more dynamic, more developed financial system. And these reforms, which are designed to increase the returns to savers, to further develop China’s equity and bond markets, and to expand opportunities for foreign financial institutions in China are very important and very promising, not just, of course, in expanding opportunities for U.S. institutions but also reinforcing this broad shift in strategy by the Chinese Government towards a growth strategy led by domestic demand.
Now, when President Hu visited Washington in January, President Obama described the evolution of our relationship as – quote – “a healthy competition that spurs both countries to innovate and become even more competitive.” And of course, just as China faces significant economic challenges at home, we have our challenges in the United States, too. And we are working very hard not just to repair the damage caused by this financial crisis, but to make sure that as we restore fiscal sustainability, as we return to living within our means as a country, we’re making sure we preserve the capacity to invest in things that are going to be critical to the future strength of the American economy. And I can say, based on the strength of our conversations and the strength of this emerging relationship, that this economic relationship with China is – will continue to grow, continue to deepen, and continue to provide tremendous opportunities for both nations. And you see today concrete, tangible signs of progress on both sides that underscore that commitment of both our presidents.
In conclusion, I just want to end where Secretary Clinton began, which is to thank the delegations on both sides, both the American and Chinese participants in these discussions. They brought a directness and candor and, frankly, greater openness than we’ve seen in the last two years, and I think that is very welcome. And I want to express my personal gratitude to Vice Premier Wang for his leadership in these discussions, and to compliment him for the very substantial changes he’s already been able to bring about. Thank you very much.
VICE PREMIER WANG: (Via interpreter) Dear friends from the press, under the guidance of President Hu Jintao and President Obama and thanks to the joint endeavor of the both sides, the third round of China-U.S. Strategic and Economic Dialogues has been a great success. The essential mission of our economic dialogue is to implement the important agreement reached between the two presidents during President Hu Jintao’s recent state visit to the United States this past January and to implement the building of China-U.S. comprehensive and mutually beneficial economic partnership.
We had in-depth discussions of our overarching strategic and long-term issues in bilateral economic cooperation, and arranged a host of win-win outcomes. Particularly, Secretary Geithner and I signed a China-U.S. comprehensive framework promoting strong, sustainable, and balanced economic growth and economic cooperation. Under the framework, the two countries will carry out an expanded, closer, and a more extensive economic cooperation. We agree that in today’s extremely complex economic environment, our two nations should further step up macroeconomic policy coordination and communication, and contribute to steady and sound economic growth in both countries.
We discussed the implications of European sovereign debt crisis, the nuclear leak disaster triggered by Japan’s earthquake, the turbulence in the Middle East for the global economy, and we highlight the international community should work together to ensure strong and a sustainable world economic recovery, to effectively advance the reform of global economic structure, to gradually build a fair and a reasonable international economic order.
The two sides agree that in a transformation of our respective growth models and economic restructuring, we will use respective strength and expanded cooperation in railway, power grids, and other infrastructure programs, and in clean energy, green economy, and science and technology innovation, and expand bi-national and the corporate exchanges and cooperation.
We highlight our commitment to build a more open trade and investment system. The United States commits to accord China fair treatment in a reform of its export control regime, relax high-tech exports control towards China, and to consult through the JCCT in a cooperative manner to work towards China’s market economy status in an expeditious and a comprehensive manner. And the two sides will strengthen cooperation in bilateral investment treaty negotiation and strengthen cooperation in IPR protection, food safety, and product quality. We will advance Doha round negotiations and reject trade and investment protectionism.
We also had in-depth discussions of financial cooperation and agreed to strengthen information-sharing and cooperation regarding the regulation of systemically important financial institutions, shadow banking, business, credit rating agencies, the reform of remunerations policy and combating illegal financing, and to jointly advance international financial architecture reform. The United States welcomes Chinese financial institutions to invest in America and to recognize China’s enormous progress in capital adequacy ratio, comprehensive consolidation supervision, and the other regulatory aspects. The United States commits to further enforce strong supervision of government-sponsored enterprises and to make sure they have enough capital to fulfill financial obligations.
Knowing oneself and each other is an important prerequisite for cooperation. In the economic dialogue, we increased our mutual understanding, expanded consensus, and arranged outcomes. This will give a strong boost to the growth of the China-U.S. comprehensive partnership based on mutual respect and mutual benefit.
I thank you, everyone, and I would like to thank Secretary Geithner and Secretary Clinton and the U.S. team for all the work you have done for a successful economic dialogue. Thank you.
STATE COUNCILOR DAI: (Via interpreter) Dear friends from the press, it’s a great pleasure to meet with you once again. The China-U.S. Strategic and Economic Dialogues have already completed its third round. For each and every round, we invite friends from the media to come here to draw a successful conclusion, so I’d like to thank you. This round of dialogue was held as President Hu Jintao paid a successful state visit to the U.S. earlier this year. The two sides agreed to build a China-U.S. partnership based on mutual respect and mutual benefit.
I want to tell you the following: First, on the strategic track, Secretary Clinton and I focused on the agreement of our two leaders and exchanged views on how to build a China-U.S cooperative partnership based on mutual respect and mutual benefit. We had in-depth and practical exchange of views.
Our dialogue covered many issues, including China-U.S. bilateral relations, major issues internationally and regionally, and we had a good conversation. We agreed that we must act in accordance with the spirit of the China-U.S. joint statements, work to increase our strategic mutual trust, enhance exchanges at higher levels, have closer dialogue on international and regional issues, and to further increase our people-to-people exchange.
We issued an outcome list of the strategic track which covered energy, environment, science, technology, transport, forestry, and climate change cooperations. I said we had a good conversation, and I did not mean that we agreed on each and every issue. However, after each round of dialogues, we successfully expanded our mutual understanding and increased our mutual trust and enhanced our cooperation, and this has added to our confidence of further developing our bilateral relations in the future.
Secondly, both of us agreed that we must increase our strategic mutual trust and deepen our practical cooperation. The U.S. had reaffirmed that it welcomes a strong, successful, and a prosperous China that plays a greater role in international affairs, and it does not seek to contain China. It respects China’s interests. And both sides reaffirmed their commitment to a peaceful – the Chinese side reaffirmed its commitment to the road of peaceful development, and will not challenge the United States interests.
A China-U.S. strategic security dialogue is a very important outcome of this dialogue. We agreed to hold this dialogue within the framework of the Strategic Dialogue, and held its first round of meeting this morning, and the China-U.S. strategic security dialogue will continue to be held in the future. We also talked about further deepening our bilateral cooperation and fostering new areas of cooperation and make our – the pie of our common interests bigger and more tasteful.
Thirdly, we agreed that we will work together in the Asia-Pacific region so that we can better coordinate with each other and better interact with each other in the Asia-Pacific. We agreed that Asia Pacific is broad enough to accommodate the interests of China and of the United States. We must work together in this region, work together with other countries in this region to uphold peace, stability in the Asia-Pacific and to promote the sustained prosperity of the Asia-Pacific and achieve the common development of all countries in this region so that the Pacific Ocean will become a peaceful one. We agreed that we will set up a consultation mechanism for Asia-Pacific region.
Fourthly, we both agree that we must work globally and respond to international as well as domestic challenges. Recently, there have been new and important changes in the international situation. For China and the United States as two influential countries, it is important that we have more consultation, coordination, and cooperation in order to promote and safeguard peace, stability, and the prosperity of the world. I wish to tell the friends from the media that the Strategic and Economic Dialogue, since its inception, has played a very important role in enhancing our mutual trust, coordinating our position, and promoting our mutually beneficial cooperation. China is ready to work with the U.S. side to further grow and make good use of this S&ED dialogue and mechanism so that it can better serve China-U.S. relations. On how to make use of this mechanism, I think we are open to the good suggestions and proposals from the friends of the media.
To conclude, like Vice Premier Wang Qishan, I would like to thank Secretaries Clinton and Geithner as well as colleagues and staff from China and from the U.S. for your hard work to ensure the success of this round of dialogue. I wish to thank the U.S. side for your thoughtful arrangements and to thank you, friends, from the media for your interest in this dialogue. I’m looking forward to seeing you again in Beijing next year and continue our dialogue. Thank you. (Applause.)
Readout of the President’s Meeting with the Co-Chairs of the U.S.-China Strategic and Economic Dialogue
The President and the U.S. delegation met today in the Oval Office with China’s Special Representatives to the U.S.-China Strategic and Economic Dialogue, Vice Premier Wang Qishan and State Councilor Dai Bingguo. They exchanged views on a broad range of economic, security and other issues of importance to both countries. Both sides reaffirmed their commitment to building a cooperative partnership that is comprehensive in scope, cooperative in nature, and yields positive achievements that benefit our people. They agreed that concrete actions by both sides are needed to build such a partnership. The President encouraged China to implement policies that support sustained and balanced global growth as well as a more balanced bilateral economic relationship. They also discussed ways to advance our common nonproliferation objectives, including working together to prevent Iran from acquiring nuclear weapons and to persuade North Korea to abandon its nuclear weapons program, to meet its international commitments and to avoid destabilizing behavior. The President underscored his preference for a diplomatic solution to both challenges. The President raised U.S. concerns about the current human rights situation in China, and underscored his support for the universal rights of freedom of expression and worship, and of access to information and political participation.
MS. FULTON: Good afternoon. Welcome to the Department of State. Very pleased to have with us this afternoon Assistant Secretary of State for East Asian and Pacific Affairs Kurt Campbell, and Senior Coordinator and Executive Secretary for China and the Strategic and Economic Dialogue at the Department of Treasury David Loevinger, here to talk about you – talk to you about next week’s Strategic and Economic Dialogue.
I’m going to turn it over to each of our guest speakers to make a brief statement and then we’ll open it up. We have about 20 minutes for questions today. So without further ado, Mr. Loevinger, please.
MR. LOEVINGER: Thank you. It’s a pleasure to be here. Next week marks the third round of our Strategic and Economic Dialogue with China. It was established in 2009 by Presidents Obama and Hu, and it’s led by the senior representatives for the Strategic and Economic Dialogue – Secretary Clinton and Secretary Geithner on the U.S. side; Vice Premier Wang Qishan and State Councilor Dai Bingguo on the Chinese side.
The objective of the Strategic and Economic Dialogue is to bring together across both governments the right people at the right level to talk about, engage, and make progress on issues of concern to both countries. The growing importance of our bilateral/economic relationship is reflected by the senior-level representation that we’re going to see at our meetings next week in the economic track, and that’s what I’m going to focus my remarks on.
We’re going to have 16 U.S. Government agency heads representing the U.S. delegation, including Fed Chairman Bernanke, Commerce Secretary Locke, Labor Secretary Solis, and SEC Chairman Schapiro. There will be about 20 Chinese agencies on the economic side represented, eight at the agency head level, including Finance Minister Xie, Central Bank Governor Zhou, the Minister of Science and Technology Wan, and Commerce Minister Chen.
Since this Administration established the S&ED two years ago, we have seen the beginning of very promising shifts in economic policy in China that have the potential to benefit China, the United States, and the world.
Let’s go back 18 months. Eighteen months ago, China’s exchange rate was frozen. Today, it’s moving. And since last June, the exchange rate has appreciated by about 5 percent against the U.S. dollar, and at an annual rate of about 10 percent when you take into account China’s higher inflation rate. Eighteen months ago, China was proposing to promote domestic innovation in ways that threatened to cut off U.S. companies and U.S. products from China’s large and rapidly growing government procurement market. Now, we’re making progress in removing these discriminatory practices.
Eighteen months ago, there was essentially no offshore RMB market. Today in Hong Kong, Chinese and foreign companies can increasingly issue RMB-denominated financial products and access the services of all of the world’s leading financial institutions without having to navigate onerous bureaucratic hurdles. Eighteen months ago, China’s economic strategy was still under its previous Five-Year Plan and was far too dependent on export-led growth. Today, China’s new Five-Year Plan is committed to transforming its economy into one where future economic growth will be based much more on domestic demand and consumption. And today, China has committed, along with the U.S., in working through the G-20 to reduce future external and trade imbalances.
These changes, which we’ve achieved through the S&ED and other parts of our bilateral relationship, offer the prospect of substantial gains for U.S. companies and U.S. workers, but many challenges remain. Next week, we will discuss these challenges candidly but constructively with our Chinese counterparts. Next week, we are going to press China to let its exchange rate adjust at a faster pace to correct its still substantial undervaluation.
We’re going to press China to implement the important agreements achieved between President Hu and President Obama on protecting intellectual property rights in China and delinking government procurement from innovation policies. We’re going to encourage China to move more quickly in lifting the ceiling on interest rates, on bank deposits in order to put more money into Chinese consumers’ pockets. We’re going to press them to make it easier for foreigners to make portfolio investments in China, and for Chinese to make portfolio investments abroad. And we’re going to encourage them to provide more opportunities for foreign financial services firms so that they can play a greater role in helping generate the kinds of financial products that Chinese households need to meet their financial goals and ensure against life’s risks, and to help Chinese companies – particularly small and medium-sized enterprises – grow their business.
To broaden the discussion we’re having on leveling the playing field, Secretaries Clinton and Geithner will be hosting the CEO roundtable on the second day of the S&ED. This will include CEOs both from the United States and from China.
These are our policy priorities. Obviously, China will raise its policy priorities at the S&ED. And we understand very clearly that to sustain China’s future growth, China will not be able to draw, to the same extent it has in the past, on factors which drove its very impressive growth for the last 30 years. These are things like a rapidly growing labor force, China’s accession to the WTO, and adaptation of relatively low-level technology. So we understand that China wants continued access to our market, greater access to U.S. high-technology exports, recognition as a market economy, and new investment opportunities for Chinese enterprises here in the United States.
On the last point, I should say very clearly that the U.S. welcomes foreign investment, including from China, but it’s important that the Chinese understand – and we will explain this at the S&ED – that our ability to make progress on the issues that matter to China depends on how much progress we see on the issues that matter most to us.
Finally, while we think that our strategy in the S&ED across the U.S. Government is helping us seize the opportunities and meet the challenges of a rapidly growing China, the most important discussions and the most important decisions regarding our ability to deal with these opportunities and challenges will not be taking place at the S&ED. That’s because the most important decisions and discussions involve policies that reside here at home. If we’re going to meet the challenges, if we’re going to seize the opportunities that China presents, the United States has to invest more in R&D, invest more in education and in public infrastructure. We need to create stronger incentives for companies to invest in the United States, both American companies and foreign companies. We need to more effectively promote U.S. exports and we need to restore fiscal responsibility.
ASSISTANT SECRETARY CAMPBELL: Thank you very much, David. Good afternoon, everyone. It’s great to see you here at the State Department. I recognize that you all have questions, so I’ll just make a few brief opening comments, and then we’ll both be very pleased to take your questions and do the best we can going forward.
David has described the Strategic and Economic Dialogue. I think it is well known to you. In many respects, it is our most important venue, our mechanism if you will, for managing this very complex relationship between the United States and China. Following on the successful visit of President Hu Jintao to Washington earlier this year, our intent is to make sure that we follow through on many of the areas that the two leaders and their senior teams committed to work together on.
Secretary Clinton leads the strategic component of our dialogue, and her counterpart is State Councilor Dai Bingguo. We’ve tried to add a few innovations to this year’s discussion. In addition to extraordinarily deep Chinese participation on a range of issues from a host of ministries and government agencies in China, we are also trying to find time for the principals and their key teams to sit down together to talk in an intimate fashion on some of the most important and critical issues confronting the relationship at the current time.
I think our intent is to have a candid and honest set of discussions on a range of issues, starting with regional problems. We want to compare notes on where we stand with respect to North Korea, and we will be very clear on what our expectations are for moving forward. We will want to talk about our joint approaches to Iran, given recent developments. And we will also look farther afield – our current interests and recent efforts to discuss issues in Sudan and elsewhere.
We will also have discussions about cross-cutting issues. One of the goals of these dialogues is to bring together people from a variety of agencies and to break down the barriers inside both of our governments to more effectively tackle issues like energy security, development, food assistance, and the like.
Another innovation at this year’s Strategic and Economic Dialogue is that we will have military representatives at a senior level from the Chinese side, joined by senior military representatives both from the Pentagon and U.S. forces in Hawaii. I think our goal is to have discussions that bring together critical diplomats and military officials. I think our goal here is to create greater understanding around issues that have the potential for miscalculation and inadvertence in our relationship, and I think we all recognize that these security issues are increasingly important in the smooth management of our relationship going forward.
I do want to underscore it is our intention to raise issues of concern directly, honestly, and opening with our Chinese interlocutors, including issues of concern associated with human rights.
I think with that, that’s our overall presentation. We start on Sunday night, a small dinner at Blair House. The Secretary – the two secretaries will be having meetings both together and in respective agencies. Part of the Chinese delegation will be having meetings in the White House. We will have strong participation at every level of our government, and I think we all recognize how important it is that these discussions proceed smoothly and that there is a candid and clear set of interactions between our two sides to avoid problems of misunderstanding and miscalculation.
With that, let me ask David to come back up to the podium. Please, if I could ask – I know many of you, but we have reporters on the Treasury side here, so if you could identify yourselves and then just – and then she’ll direct the question towards us. So, David, here, please.
MS. FULTON: First question, right here.
QUESTION: (Inaudible) with (inaudible) Japanese newspaper. Two questions for Mr. Loevinger, one question for Mr. Campbell. Regarding economy – economic issues, since middle of last year, U.S. Treasury started to emphasize that in order to combat inflation – in order to counter inflation, it would be good for China to appreciate – accelerate the appreciation of the RMB. And at that time, Chinese side oppose – strongly opposed to that. But now we think they are starting to say that it would be effective for them to use those. So finally, do you think Chinese side decided to agree on the U.S. assessment, and do you see any change of the change in tone or changing policy of the Chinese accelerate policy? I mean, more acceleration of the appreciation of RMB.
And also, the other day Mr. – Secretary Geithner told us that the – he’s now get more attention to the next stage of financial reform in China on top of the main issues. Are – is – does this imply that the – if you are defined the S&ED efforts past two years – like maybe mainly focusing on that currency issue, but now you are moving onto the next level – I mean, second level that you’re going to talk more broader things?
And one question for Mr. Campbell. You touched on the human rights issue should be important, and you’re going to touch on the human rights issue. How are you going to press China on human rights front, especially given that in light of the severe human rights separation by the Chinese Government, the – when we saw the Arab Springs?
MR. LOEVINGER: Okay. So first on your two questions, we absolutely see a change in tone in our discussions with our Chinese interlocutors that they are talking more and more about how a stronger RMB can help them contain inflationary pressures in China, including the rise of commodity prices and other imports.
On financial sector reform, I’d say – again, this is our third S&ED. And the first S&ED was in 2009, and the focus then was how the U.S. and China, both through our own actions and collective actions, could stabilize the global economy, stabilize the global financial system. In the last S&ED, we talked about, again, through individual and collective actions, how we could strengthen recovery. The focus this year is how do we sustain the recovery going forward. I think both China and the U.S. are much more confident about the strength and durability of the recovery. And we see an important aspect of what we talk about when we say rebalancing growth is that financial sector reform in China can play a very important role.
I just gave one example of how roughly 75 percent of Chinese household savings, very large savings, are still in bank deposits that largely earn a negative rate of return after inflation. If China can, over time, ease the restrictions on the interest rate the banks can offer to depositors, that’s going to put more money in Chinese consumers’ pockets and help promote China’s efforts to promote a more consumption-led economy.
ASSISTANT SECRETARY CAMPBELL: And to – was it your fifth question or your – I can’t remember what number – (laughter) – so I lost count halfway through. So, look, on the important issue that you raised with respect to human rights, I think it is our position that we want to approach this critical matter from a principled and consistent approach. You will see that in the President’s meeting, in the Secretary’s statements, in all her meetings, we raise human rights issues, not just generally but specifically, specific cases. We ask Chinese interlocutors for explanations about disappearances, about arrests and legal procedures which we feel are either lacking or inappropriate, and it is our position that we will continue to do so as part of a broad, strategic approach to our relationship.
And Secretary Clinton – and I think not just the Secretary, but other key members of the U.S. delegation, I think, will be raising these matters with counterparts in the Chinese system. It is important that on these matters of really not just national import, but international import, the Chinese hear concerns not just simply from the Secretary of State or key players in the White House, but all members of the American political establishment because these truly are matters that have the potential to affect our overall relationship.
MS. FULTON: Next question.
QUESTION: Ian Talley here, Dow Jones. What concern – Europe has been talking about filing a WTO case in terms of export subsidies in China. What concern and evidence do you have over export subsidies in China? Is there a case for a WTO suit, and will you be warning the officials here of that? And secondly, is it necessary for China to liberalize its financial markets to speed up its exchange rate appreciation to prevent sterilization costs from being too high?
MR. LOEVINGER: Okay. On your first question, I’m glad you raised that. That is another very important part of our dialogue with China in the economic track. There is a whole array of international organizations and conventions that govern international trade and finance. Many of these were established in the ’70s and ’80s, when China was a very small player on the global economic stage. Now, China is the second largest economy, one of the largest exporters, one of the largest markets for the U.S. and other countries. And so it is vitally important in the S&ED that we continue our work to bring China into this full array of conventions and organizations and reform and modernize these conventions and organizations to reflect the global economy of 2011 and not 1948.
And the reason why I’m answering your question that way is one of the issues that we have started discussing with China is the international arrangement on official export credits. This was, again, negotiated many decades ago. No one cared whether China was in or out. China was just too small a player. Now, China is the world’s largest provider of official export credits, and I think China increasingly understands that when the global rules were being written on things like official export credits, it’s important – increasingly important that China is at the table.
On the link between financial sector reform and exchange rate reform, obviously there’s a lot of important links. China continues to intervene massively in foreign exchange markets to constrain the appreciation of its currency and then to – as it buys foreign currency, it’s injecting RMB into the market and to help manage inflationary pressures, it then has to soak up the RMB that it issues. And some of the ways it does that, like reserve requirements, it imposes costs on the banking system and on bank depositors. And so these issues of exchange rate reform and financial sector reform are obviously linked. If China were to let the exchange rate appreciate and be more flexible, that would reduce pressures on the banking system and help free up a more liberal market-oriented financial sector.
MS. FULTON: Next question, Andy.
QUESTION: Andy Quinn from Reuters.
ASSISTANT SECRETARY CAMPBELL: How are you?
QUESTION: I’m wondering if you could talk a little bit more about the inclusion of the military side of this S&ED. When was that decision made, at what level? And is that – was there any concern from the Diaoyutai/Senkaku incidents of last year, the South Pacific – the South China Sea policy that the Secretary rolled out in Hanoi, that those sort of particularly sea tensions are dangerous and haven’t been managed properly?
ASSISTANT SECRETARY CAMPBELL: It’s an excellent question, and thank you for it. I think it has been long our intent to develop dialogue with China on emerging and, frankly, traditional security issues that involve not just traditional players in the foreign ministry but also other players in the Chinese Government, including the military and others. And it is our belief that the most effective way to deal with some of these emerging problems and challenges is to ensure that we have a cross-cutting representation in some of these dialogues.
Earlier this year, so you know, Secretary Gates had a good visit to Beijing, and I think reestablished our mil-to-mil partnership, our relationship. The senior Chinese official will be visiting Washington in the coming weeks. I think our desire in this dialogue is, given its importance, to ensure that key players in our military establish, including Admiral Willard from Hawaii – he’s the commander of our forces – key players in the Pentagon, and also senior players from the Chinese General Staff have the opportunity to interact again with civilian counterparts on critical issues. And that’s exactly what we’ve set out to do. I think it’s an important innovation. I think it provides a venue for improving trust and predictability in the overall relationship.
MS. FULTON: Next question.
QUESTION: My name is (inaudible) with Phoenix TV.
ASSISTANT SECRETARY CAMPBELL: Hi.
QUESTION: My question is, among a wide range of issues you mentioned, what is the most important one you want to address at the coming up S&ED? And also, yesterday, Secretary Gary Locke said some promises China made at S&ED two years ago falls far short from – of the promise. Do you share the same concern on the strategic side? Thank you.
ASSISTANT SECRETARY CAMPBELL: I would find it hard to give you an absolute hierarchy on the issues that are of manifest importance between the United States and China. In fact, there are many, and I’ve tried to articulate some of those at the outset. And frankly, we want to see progress on all of those issues. We saw some important statements on the part of our Chinese interlocutors and of the Chinese hierarchy when President Hu Jintao visited on issues, for instance, relating to North Korea. I think we seek to follow up on some of those discussions overall.
I think we recognize that cooperation and developing habits of cooperation and finding common ground, common cause, is a challenging, time-consuming endeavor. We’re committed to it, and we’re looking forward to this next round of the S& – the Strategic and Economic Dialogue to work constructively and consistently on a broad range of issues as described earlier.
MS. FULTON: Next question?
ASSISTANT SECRETARY CAMPBELL: Do you want to do the Gary Locke thing? Why don’t you do the Gary – I think the Gary Locke part of the question.
MR. LOEVINGER: Okay. I mean, I consider – the S&ED is a year-round process. We try and make progress where we can when senior officials come and meet. But throughout the year, we sit down at the staff level and carefully look at the commitments that each side has made, and we take our commitments very seriously.
I think China takes its commitments very seriously. And a recent example was China’s commitment to allow foreign banks to underwrite commercial bonds in its inter-bank market. That was a promise that they had made at the first S&ED. We continued to press them on it. And a few weeks ago, they issued an announcement that invited foreign banks to underwrite corporate bonds.
And so everything may not happen a week after the S&ED, but it’s something that both sides pay very close attention to.
MS. FULTON: Okay. Right here.
QUESTION: (Inaudible), China’s Action Media. Two questions – one economic and one political. The economic question is: It’s reported that China is considering strategy about diversifying its foreign reserve investment. So will U.S. and China talk about this in the S&ED? And if yes, what will you talk about?
The second one is – I mean, what’s your view on China’s role in the U.S. antiterrorism war? And do you think bin Ladin’s death will have some influence on the future U.S.-China relationship in terms of this?
MR. LOEVINGER: Okay. So the first thing on reserve management, we’re going to be talking about monetary policy, we’re going to be talking about exchange rate policy, we’re going to be talking about fiscal policy, we’ll be talking about reserve management policy. That’s what we do in the S&ED. That’s why we bring people like Ben Bernanke and Governor Zhou and all the senior officials on both sides together to talk. We have a lot of questions for the Chinese side; the Chinese have a lot of questions for us. So of course, we’re going to talk about all the important policies.
ASSISTANT SECRETARY CAMPBELL: Let me just say it is our intention to discuss recent developments in the Middle East with our Chinese interlocutors. And yesterday, you will have seen that official Chinese news organs – and the foreign ministry put out a statement that supported recent American actions in Pakistan with relation to Usama bin Ladin, and I think the U.S. side very much appreciated the support from Chinese interlocutors. And I think there’s a recognition that there are areas in which both China and the United States face challenges associated with terrorism and the like in the international environment, and we seek opportunities to both discuss them and find suitable and appropriate arenas for cooperation going forward.
MS. FULTON: Next question.
QUESTION: Yeah. It’s for Mr. Loevinger. At the state visit, as you said, you’re going to follow on some of the commitments that were made there, and so far, three and a half months in some of the business community seems to be voicing concerns that they haven’t seen enough public dialogue in Chinese from the central government with regards to the indigenous innovation pledge to delink from government procurement, and they’re also very concerned that they’ve not seen any increase in legal software sales to government entities, which was another pledge, to audit that process and publicly make that audit. So I’m wondering, what are the sort of things that you would hope to hear from the Chinese at this meeting on those issues, and also if you’re interested in – what we should look for in terms if there is a way to move the bilateral investment treaty, which Secretary Geithner said the other day is in both countries’ – tops of their agenda. What would we look for if there is some decision to move that to a next level?
MR. LOEVINGER: Okay. Thanks, Scott. One of our priorities is to make sure that the important commitments that President Hu made when he came to Washington in January are fulfilled. And the follow-up on the previous question, commitments are important, but action, tangible action is even more important. So at the S&ED without a doubt, we have been talking a lot with our Chinese counterparts, and we’ll continue to talk about how we can turn these very important agreements into tangible results on the ground, on innovation, delinking, procurement policy from innovation policy, and also to ensure not only that Chinese Government agencies have the fiscal resources to buy legal software, but that they stop using illegal and unlicensed software.
You’re second question? Oh, yeah. So without a doubt, another important area that’s going to get a lot of discussion because of the interest of both sides is what we can do to promote open investment policies. Foreign direct investment has been fundamentally important to the growth of China. It’s hard to imagine the Chinese economic miracle that we’ve seen could have occurred without foreign direct investment. And foreign investment has been fundamentally important to the growth of the United States. We want to keep that going. Chinese companies are increasingly interested in investing in the U.S. So yes, without a doubt, we’re going to be talking about ways we can promote cross border investment.
MS. FULTON: I think we have time for just maybe one more question. Right here.
QUESTION: I was wondering, are you going to be bringing up Chinese censorship of the events in the Middle East of the Arab Spring events with them? And also, you said you were going to bring up the issue of Sudan with them, in light of the recent events, the referendum, recent violence there. What message are you going to bring to them on Sudan?
ASSISTANT SECRETARY CAMPBELL: First of all, I think as you know, Secretary Clinton, on a number of occasions, I think, has been a very articulate voice about a whole host of issues associated with internet freedom. She has underscored that in public and in her private conversations with a host of individuals in China and elsewhere. And I think she will look to reaffirm those messages as well. I think one of the reasons that we want a dialogue with China is to be able to have a discussion, to share our perceptions about developments in the Middle East. This will be the first time that we’ve really met at a consequential high level since the developments that have swept through the Middle East, and I think it will be important to hear what Chinese interlocutors and friends have to say about what’s transpired there and what potential impacts they feel those developments might have on their own society.
I think on Sudan, what I would recommend is that we will be doing a debrief subsequently, and I think I’ll be able to give you greater details at that time about what we hope to – more of what we have discussed and what potential progress we’ve made. All right.
MS. FULTON: With that, gentleman, thank you for your time.
ASSISTANT SECRETARY CAMPBELL: Thank you all very much.
MS. FULTON: We appreciate it. Thank you.