U.S. Department of the Treasury
May 23, 2007
Second Meeting of the U.S.-China Strategic Economic Dialogue
The United States and China today concluded the second meeting of the Strategic Economic Dialogue (SED). President Bush and President Hu established the Strategic Economic Dialogue in September 2006 as a focused and effective framework to address shared priorities and mutual concerns. For the meeting held May 22 and 23 in Washington, 17 U.S. Cabinet officials and agency heads joined Secretary Paulson for discussions with China's Vice Premier Wu Yi and a delegation of 15 ministers and representatives from a total of 21 Chinese government ministries and agencies.
The Strategic Economic Dialogue is a management tool for our bilateral economic relationship and is an on-going process involving continuous discussions between officials from both nations. The SED addresses long-term structural issues and seeks near-term results which build confidence on both sides and demonstrate progress toward long-range objectives. At the meeting this week, leaders from both countries agreed to increase market access, open the financial sector, foster energy security, protect the environment, and strengthen the rule of law.
Increasing Market Access
Trade fosters an environment of competition, innovation, research and investment, which leads to higher incomes and a wider range of goods and services at lower prices. Increased access to markets in China creates opportunities for American companies. During this second meeting of the Strategic Economic Dialogue, the United States reached new agreements to further open China's markets to U.S. products and services.
- Air Services Liberalization: The United States and China committed to expand the existing bilateral aviation agreement through liberalization of air services rights. This new accord provides for a doubling of daily passenger flights from the United States to China by 2012, starting with the addition of a new daily flight this year. The agreement also will provide U.S. cargo carriers with virtually unfettered access to Chinese markets by lifting all government-set limits on the number of cargo flights and cargo carriers serving the two countries by 2011. U.S. and Chinese officials have committed to resume negotiations in 2010 to establish a timetable to achieve the mutual objective of full liberalization.
- Promoting Growth in the Tourism Industry: The United States and China signed a declaration of intent to launch negotiations to facilitate Chinese group leisure travel to the United States. The Chinese travel market is expected to grow to 100 million travelers within the next 15 years according to the United Nations World Travel Organization. Allowing tourism companies to arrange trips for Chinese travelers to the United States is a significant step, given that one in seven jobs in the United States is related to the tourism industry.
- Expanding U.S. Exports: The Export-Import Bank of the United States and the Export-Import Bank of China signed a memorandum of understanding that will provide loan guarantees for the export of large scale capital goods from the United States to China, supporting U.S. export jobs and promoting China's sustainable development.
Opening the Financial Sector
Financial markets connect money with ideas and ambition, the lifeblood of innovation and dynamism. U.S. financial institutions are helping to expand a vast new market in China for American financial services products. During the second meeting of the Strategic Economic Dialogue, the United States and China committed to further financial sector reform, including:
- Expansion of U.S. Financial Services Industry: China agreed to remove a block on the entry of new foreign securities firms and resume licensing securities companies, including joint-ventures, in the second half of 2007. In addition, China will announce before SED-III that it will allow foreign securities firms to expand their operations in China to include brokerage, proprietary trading and fund management. This will create opportunities for U.S. firms and provide new competition and expertise in the Chinese securities industry.
- Increased Qualified Foreign Institutional Investors (QFIIs) Quotas: To develop broader and deeper integration into the global financial market, China will raise the quota for Qualified Foreign Institutional Investors from $10 billion to $30 billion.
The United States also welcomes China's May 10, 2007 announcement to expand Qualified Domestic Institutional Investors (QDII) investment to include equity investment. This change can help diversify financial sector assets in China, which in turn can help enhance financial sector stability.
- Pending Foreign Property Insurance Company Conversion Applications: The China Insurance Regulatory Commission will now make decisions by August 1, 2007 on applications for conversion from branch to subsidiary that have been pending for more than a year. China also commits to abide by regulations that require 60 day processing for future applications. This will allow for more efficient and cost effective operations.
- RMB Transactions by Foreign Banks: China agreed to immediately allow foreign-invested banks to offer their own brand of RMB-denominated credit and debit cards. This will allow U.S. banks to offer a full range of RMB services to compete with Chinese banks that currently offer these services.
- Market Access for Insurance Firms: Enterprise Annuities: The Chinese Government agreed to streamline by SED-III the application and licensing process for the provision of enterprise annuities by financial institutions, which will allow U.S. insurance firms already operating in China to widen the range of services they provide and increase the amount of capital under their management for investment.
Promoting Energy Security and Protecting the Environment
Energy security and environmental protection are shared priorities for both the United States and China. This creates demand and incentives for the rapid development and deployment of clean and efficient energy technology. At the second meeting of the Strategic Economic Dialogue, both countries agreed to:
- Coal-Mine Methane (CMM) Capture: Over the next five years, the United States and China will develop up to 15 large-scale CMM capture and utilization projects in China.
- Develop Clean Coal Technologies: The United States and China will provide policy incentives to promote the full commercialization of advanced coal technologies and will advance commercial use of carbon capture and storage technologies. China uses twice as much coal as the United States to power its growth and economy, and that number is expected to double by 2020.
- Reduce and Eliminate Trade Barriers: The United States and China agreed to work together as part of the WTO Doha negotiations to discuss reducing or eliminating tariff and non-tariff barriers to environmental goods and services. Working together, the United States and China can increase access and reduce the costs of these important environmental technologies and services.
Strengthening the Rule of Law
- Fighting Counterfeit Goods and Protecting Our Borders: Protecting intellectual property rights, welcoming competition, promoting transparency and observing the rule of law are all critical to creating the framework within which creative ideas can flourish. During the second meeting of the SED, the United States and China signed an agreement to strengthen the enforcement of intellectual property rights laws. The agreement provides for an exchange of information on counterfeit good seizures, experiences with counterfeit goods and dialogue among respective Customs staff to improve intellectual property rights enforcement in our nations.