Statement by John Snow, U.S. Secretary of the Treasury

Beijing, China
September 3, 2003

Posted on Sep 4, 2003

Let me begin by thanking my hosts for inviting me to Beijing to discuss issues of mutual interest to our countries. This is my first visit to China since becoming Secretary of the Treasury, although I have visited many times in private life. I appreciate the hospitality I have been shown and the thoughtful discussions we are having. I am honored to have the opportunity this afternoon to continue these discussions with Premier Wen.

Early last year when President Bush came to China and met with President Jiang Zemin, he said that ¡°China and the United States, both with significant influence in the world, should step up dialogue and cooperation, properly handle their differences, and work together to move the constructive and cooperative relations between us further forward." Our talks this week are in keeping with the spirit President Bush intended.

Economic engagement between the United States and China should promote prosperity in both countries and for all of our trading partners. Just as China benefits from our market, U.S. businesses and consumers should benefit from China¡¯s growth. Clearly, investments and technology from the United States help to sustain high growth in China.

In recent years, China has made historic strides in reforming its economy and moving to a market-based system, but continued progress is necessary.

It has been our view for some time that the best international economic system - for the United States, for China, and for the world - is one based on the principles of free trade, free capital flows, and market-based exchange rates among the major economies.

With these principles in mind I am here to encourage China to take advantage of its strong growth to accelerate progress in these areas.

We are committed to a growing and mutually beneficial trade relationship with China. It is important that China fully implement its World Trade Organization commitments. Progress on market opening should be made for products, such as soybeans. We also encourage further relaxation of ownership rules in financial services. Another area of concern for me is that U.S. companies continue to lose billions of dollars because of the piracy of intellectual property. Enforcement of intellectual property laws is essential to our economic relationship.

The free flow of capital is a fundamental component of our global system of international trade and finance. While I sincerely welcome recent policy changes that allow greater capital mobility, it¡¯s in China¡¯s interest to accelerate these efforts. For example, it would be beneficial to expand qualified institutional investor programs to increase portfolio inflows and outflows; and to liberalize long-term debt transactions. Furthermore, the development of open capital markets is necessary.

Finally, the establishment of a flexible exchange rate regime would benefit both our nations as well as our regional and global trading partners. Market-determined floating currencies are the key to a well-functioning international financial system. For the world¡¯s major traders only freely floating currencies bring the accuracy and efficiency necessary for proper pricing, account settlement and capital flows.

We have learned over the years that rigidities of all kinds tend to distort the proper functioning of markets. Open, competitive markets, with little or no interference, are needed to ensure that people and investment capital can seek out the best ideas and opportunities.

Progress on each of these issues will yield long-term benefits for the economies of China, the United States and the world.

During my meetings this week I expressed these views with Chinese economic leaders. On the currency issue in particular, I was encouraged to hear a reaffirmation of China¡¯s longstanding goal to move toward greater flexibility. I was assured that interim policy steps are now being taken and progress in this area will continue.

In order to further communication and understanding between our nations on this and other important economic, financial and trade issues, I have extended an open invitation to host Vice Premier Huang Ju and other officials to come to Washington to continue the work on these issues. I also intend to appoint a Treasury attach¨¦ resident at the U.S. Embassy in Beijing.

I look forward to our continued discussions as we cooperate to enhance our economic relationship.