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2011-03-22 | All chapters

China Premier says 'urgent steps' needed on trade imbalance
Bloomberg, 22nd March 2011

March 21 (Bloomberg) -- Chinese Premier Wen Jiabao, speaking to a group of executives including JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon, said “urgent” steps are needed to narrow the nation’s trade imbalance with the U.S.

The world’s second-biggest economy posted a trade surplus of $183 billion last year, dropping for the second straight year, according to government data. Almost all of China’s trade surplus comes from bilateral trade with the U.S., Wen said today in Beijing.

“Urgent steps should be taken to close the trade imbalances between the two countries,” Wen said while meeting with foreign executives that also included Royal Dutch Shell Plc Chief Executive Officer Peter Voser, HSBC Holdings Plc Chief Executive Officer Stuart Gulliver and Saudi Arabian Oil Co. Chief Executive Officer Khalid Al-Falih.

The Group of 20 nations are working to formulate a method for monitoring and avoiding international trade and capital-flow imbalances blamed in part for sparking the global financial crisis. China, which reported a trade deficit for February, has made bolstering domestic consumption and reducing its reliance on exports for growth a major economic target in its five-year plan that covers the period from 2011 through 2015.

Wen said today the U.S. should foster Chinese investment in its economy and relax restrictions on American exports to China as part of efforts to address the trade imbalance. The Chinese premier said he made the same suggestions to U.S. President Barack Obama in September 2009.

‘Not Happened’

“But that has not happened,” Wen said. “We hope the U.S. will further ease its restrictions on market access.”

Global economic imbalances have been marked by low savings and high rates of consumption in the U.S., U.K. and other developed nations, versus greater savings and lower levels of consumption in China, India and other emerging markets. This pattern of demand “will have to change,” Bank of England Governor Mervyn King said last month.

China, the world’s biggest exporter, reported a $7.3 billion trade deficit for February, the biggest in seven years. The nation may post a total trade deficit for the first three months of the year, Commerce Minister Chen Deming said March 20.

JPMorgan’s Dimon, HSBC’s Gulliver and other executives are in Beijing for an annual meeting with Chinese government leaders called the China Development Forum. At last year’s event, Wen appealed to executives including Ford Motor Co.’s Alan Mulally for their help in convincing their governments to avoid a global currency war.

Equal Treatment

Wen pledged today at the meeting that was also attended by Chinese Central Bank Governor Zhou Xiaochuan and Commerce Minister Chen that foreign companies in China would receive the same treatment as domestic Chinese companies. Intellectual property rights will also be protected, Wen said.

“I feel optimistic about the U.S. economy, about the European economy and the whole world economy,” Wen said. It won’t take long for the U.S. to “get back on the track of a strong recovery,” he told the executives.

Domestically, Wen said he pays “attention most” to inflation. The government needs to strike a balance between a sufficient pace of economic growth that generates jobs and also managing consumer price increases.

Wen also said China’s banks “now face new challenges,” including the risk of new nonperforming loans after the country successfully reduced bad debts in the banking sector over the past decade.

Healthcare Spending

Responding to a question from Novartis AG Chief Executive Officer Joseph Jimenez, Wen said the government would work to increase health-care reimbursements and further expand health care coverage, which now covers about 1.24 billion people, or about 90 percent of China’s population.

Wen said the government plans to increase average health- care subsidies to about 300 yuan per person from 200 yuan in the next two to three years. He also said China’s pharmaceutical industry lagged behind the global standard.

The Chinese premier also pledged to fight official corruption, saying it “poses the biggest threat” to the country and comparing it to “cancer cells.”

“No matter how good the infrastructure is in a country, if there is bad corruption, I don’t believe there will be a favorable investment climate,” Wen said. “It will also be impossible for that country to achieve sustainable development.”

Wen said political reform was necessary to combat graft.