BEIJING (AP) President Barack Obama and his Chinese counterpart, Hu Jintao, promised to work together to renew global growth and build a strategic partnership but did not discuss Beijing’s unease about its holdings of U.S. debt and other disputes in their first meeting at the London economic summit. Obama accepted an invitation to visit Beijing this year and the two leaders agreed to create a new U.S.-China Strategic Economic Dialogue, said a senior American official who briefed reporters in London.
The official said Obama agreed during the meeting Thursday on the need to change the International Monetary Fund to give China and other developing countries an “an appropriate role” but the two leaders did not discuss details. A bigger voice in managing the world’s finances is a key Chinese demand, and Beijing has suggested its contribution to global bailout efforts will be contingent on receiving it.
“The presidents agreed that the strong links between China and the U.S. economies have been a great mutual benefit, both in terms of trade and investment, and they were eager to build on that,” said the official, who talked on condition of anonymity in line with U.S. government policy. “Each side explained what they were doing and the goals they had in mind, and just expressing the importance that we, together, stimulate our economies and get growth going,” the official said.
The Strategic Economic Dialogue, due to meet later this year, succeeds a twice-a-year forum begun under former President George W. Bush to address a wide range of disputes over trade and other issues. The new forum, held once a year, is to be led by U.S. Secretary Clinton and Treasury Secretary Timothy Geithner and, on the Chinese side, by Vice Premier Wang Qishan and State Counselor Dai Bingguo.
Hu and Obama avoided U.S.-Chinese disputes, possibly to avoid fueling public pessimism about the global ecomomy. They did not discuss Beijing’s unease about the safety of its vast holdings of U.S. government bonds and its proposal last month for a global currency to replace the dominant dollar, according to the American official.
“There was no mention of either of those two subjects,” the official said. Hu and Obama also avoided expressing their government’s criticisms of each other’s stimulus plans.
Beijing is uneasy that Washington’s heavy spending might fuel inflation and weaken the dollar and has appealed to Obama to steps that might erode the value of China’s estimated $1 trillion in U.S. government debt. Washington needs Beijing to help finance its stimulus by buying more U.S. Treasury securities, and other Western governments want Chinese money to help finance a global bailout fund.
China has said its biggest contribution to a recovery will be to ensure strong growth in its own economy, the world’s third-largest. “There was not a detailed discussion of stimulus,” the official said.
However, he said Obama expressed awareness of the risks of higher inflation from stimulus spending and promised to bring down the U.S. budget deficit after economic growth revives.