China and the United States have made incremental progress in accelerating bilateral investment treaty talks, addressing industrial overcapacity and expanding RMB trading in the United States at this week's annual high-level dialogue, U.S. experts said.
BIT TALKS
Senior Chinese and U.S. officials have agreed to speed up negotiations on a bilateral investment treaty (BIT) during the eighth China-U.S. Strategic and Economic Dialogue (S ED) that concluded Tuesday in Beijing.
"The two countries will exchange new 'negative list' offers in mid-June," Chinese Vice Premier Wang Yang told a news briefing on Tuesday. "We will try to reach a mutually beneficial and high-level agreement at an early date," he said.
A negative list outlines sectors closed to foreign investment. The last time the two sides exchanged such lists was in early September last year, days ahead of Chinese President Xi Jinping's state visit to the United States.
Xi on Monday urged both countries to strengthen coordination on their macroeconomic policies and reach a reciprocal bilateral investment treaty as early as possible.
"I think this is as good as you could hope for, given how the U.S. has already expressed its view that the Chinese list is too long and needs to be cut for a BIT to become realistic," Jacob Kirkegaard, a senior fellow at the Peterson Institute for International Economics, told Xinhua.
That will "bode well" for the negotiations if China's new negative list offer is "significantly reduced" in length from the previous offer, said John Frisbie, president of the U.S.-China Business Council (USCBC).
China and the United States started to negotiate a BIT in 2008 and 24 rounds of talks were held ahead of the eighth S ED as both countries sought to increase mutual investment.
STEEL OVERCAPACITY
The two sides held candid discussions on excess capacity in steel and other industries during the two-day dialogue, and both recognized that this is a global issue which requires collective responses.
"The United States and China support ongoing international efforts aimed at identifying effective government policies for addressing global excess capacity and structural adjustment, and achieving greater transparency on industry developments to promote market-driven responses," a joint statement released after the dialogue said, noting that the two countries will attend an OECD (Organization for Economic Cooperation and Development) Steel Committee meeting in September to address global excess capacity.
The statement also said the United States acknowledges China's recently announced plans to close 100 to 150 million metric tons of steel capacity, and to strictly prohibit the expansion of crude steelmaking capacity over the next five years.
Thomas J. Gibson, president and CEO of the American Iron and Steel Institute, said on Tuesday in a statement that his institute welcomed "the new commitments by Chinese leaders to adopt measures to strictly contain steel capacity expansion, reduce net steel capacity, eliminate outdated steel capacity, and dispose of 'zombie enterprises' through restructuring, bankruptcy and liquidation, as appropriate." "China's participation in further efforts to address global excess capacity at the OECD Steel Committee is also positive," Gibson said.
Frisbie, the USCBC president, called on the United States to use "internationally-accepted, legally-sound" trade tools to address distortions in the U.S. market caused by overcapacity problems.
The China-U.S. annual strategic dialogue comes at a time when steel overcapacity has become an acute global challenge and U.S. steel producers are increasingly resorting to trade remedies and tariff protection to ride out a sluggish steel market, a practice strongly opposed by Chinese steel producers and exporters. Kirkegaard said he was convinced that this round of strategic dialogue "will help prevent a much more damaging confrontation later this year over steel and help channel the issue into a multilateral OECD-led process."
RMB TRADING CLEARING IN
U.S. China has set up offshore RMB trading hubs in Hong Kong, London and Toronto, but the U.S. market remains untapped. China will grant the United States a quota of 250 billion yuan (38 billion U.S. dollars) under the country's Renminbi Qualified Foreign Institutional Investor program and appointed one Chinese and one U.S. bank to conduct RMB clearing business in the United States, according to the statement.
"It's very encouraging that both sides have endorsed a framework for facilitating RMB trading and clearing in the U.S. for the first time," said Michael R. Bloomberg, chair of the Working Group on U.S. RMB Trading and Clearing and founder of Bloomberg L.P. "This will help bring new momentum to the working group's efforts to expand trade between the United States and China by allowing the RMB to be cleared in the U.S.," he added.
ED MECHANISM
U.S. experts said the S ED has become an important venue for promoting cooperation and managing differences between the world's two largest economies, but this mechanism needs improvement to become more effective in the future.
"As we approach the close of the Obama administration, it is important to remember that the S ED was established in recognition of the need to expand engagement to address the array of issues in the U.S.-China relationship," Frisbie said.
"In the next administration, the mechanisms for dialogue can be tweaked to make further improvements and become more effective, but high-level engagement is now mandatory in the U.S.-China relationship," he added. Kirkegaard said the S ED is very much part of the overall process to manage the U.S.-China relations.
"The S ED is part of the process to 'avoid doing stupid things' and keep small problems from growing into something bigger -- as such, its real value is largely preemptive as well as latent in the sense that if an important issue suddenly needs to be dealt with in U.S.-China relations, in the S ED the two governments have a channel available," he said.
"This S ED will surely have been instrumental in paving the ground for any big announcements made when President Xi and President Obama meet later in the year and also for helping avoid large confrontation over 'manageable issues' like steel," he said.
Latest comments