Treasury Secretary Geithner: More Durable Stability In Econ)
May 31 2009 - 9:31AM
Dow Jones News
U.S. Treasury Secretary Timothy Geithner, while here in Beijing
this week, is prepared to address any Chinese concerns about the
rising deficit and jittery bond market with an encouraging picture
of a healing, more stable U.S. economy.
While he's far from declaring victory over the unprecedented
financial crisis, Geithner says there are solid signs of
repair.
"We are seeing more durable stability in the economy and the
financial system is substantially in better shape," Geithner told
reporters Saturday en route to Beijing, his first trip here since
taking office in January. "But we have a ways to go, and we need to
keep working in the U.S. and with other major economies to restore
conditions for a sustainable recovery."
Geithner's upbeat take on the economy comes despite growing
outside concerns about a recent surge in long-term interest rates.
The rise in yields on U.S. Treasury bonds seem to reinforce
Geithner's view that the recession is easing and investors no
longer feel the need to rush to safety in the form of U.S. bonds.
But it also means higher borrowing costs, even as federal officials
launch creative programs primarily aimed at keeping rates low
enough to boost the economy and thaw credit markets.
Geithner, who will be in Beijing through Tuesday, is expected to
reassure China - the largest holder of U.S. Treasurys - about its
substantial investments in U.S. debt as well as the strength of the
U.S. dollar. The concern for China is that soaring deficits will
hurt the value of the dollar and diminish the value of their U.S.
debt holdings.
Still, U.S. officials say that while the deficit is likely to
rise as they take measures to stem the crisis, they are committed
to taking new steps to control the deficit once the recovery is
firmly established. That's a message Geithner is prepared to carry
into his meetings this week.
"I will of course make it clear that we are committed to a
strong dollar, that we are committed to bringing our fiscal
deficits down over the medium-term to a sustainable place," the
Treasury chief told the Chinese press, according to a transcript
Treasury first provided U.S.-based reporters on Saturday. "We
believe in a strong dollar. A strong dollar is in the U.S.
interest."
Geithner added in that briefing that the Federal Reserve is
"completely committed to keep inflation low and stable over time."
The U.S. "will do anything we need to do to make sure that we bring
down our fiscal deficits and improve the strength of the US
economic fundamentals," he said.
Geithner will still be in China on Monday when battered domestic
auto firm General Motors Corp. (GM) is expected to file for
bankruptcy. But Treasury spokesman Andrew Williams Saturday said
"Geithner has been and will continue to be in contact with" Larry
Summers and Steve Rattner, two key members of U.S. President Barack
Obama's auto task force.
Geithner, meanwhile, has a full schedule in Beijing. He'll meet
with President Hu Jintao, Chinese Premier Wen Jiabao, and Vice
Premier Wang Qishan, who invited Geithner to China after the two
officials met in London in April. Chinese officials have recently
expressed fears about their U.S. debt holdings and questioned the
use of the dollar as the world's reserve currency. But Geithner, in
comments to the Chinese press ahead of his trip, said he expects
the dollar's role in the financial system to remain substantial
"for a very long time."
Meanwhile, on the trip to Beijing, Geithner said he wants to
work with China as well as other key nations to strengthen the
global financial system.
It's important for China to be a key participant in discussions
on global financial reforms, he said, noting that the U.S. and
China are among the two most important economies in the world.
"We are committed to reforming the international system and our
interests are best served by giving China a stake in that process,"
he said. "We would like to build with China the kind of
relationship we built with the G7 (Group of Seven leading nations)
over the last several decades."
In addition to meeting with Chinese leaders, Geithner on Monday
will speak at Peking University, where he studied Mandarin. He'll
also visit the Ford Foundation, a place he has a personal interest
in given that his father helped establish the Beijing office of the
organization.
Experts say the crisis and rising deficits have left Geithner
with less maneuverability to push China for immediate, significant
economic policy changes. Instead, they see the secretary doing a
lot of reassuring on the U.S. fiscal outlook while in meetings with
his Chinese counterparts. It's also expected that the secretary
will avoid making controversial currency issues the centerpeice of
his talks.
Overall, Geithner said he wants to discuss a range of issues
where the U.S. and China can deepen cooperation.
"Complaint diplomacy - that will not be my strategy," Geithner
said during his press briefing at the Washington Foreign Press
Center.
-By Maya Jackson Randall, Dow Jones Newswires; 202-862-9255;
maya.jackson-randall@dowjones.com