MercoPress. South Atlantic News Agency

China and U.S. seal economic and financial “partnership”

Geithner had to openly state in Beijing that “Chinese assets are very safe”

In his first official visit to China since becoming Treasury Secretary, Mr Geithner told politicians and academics in Beijing that he still supports a strong US dollar, and insisted that the trillions of dollars of Chinese investments would not be unduly damaged by the economic crisis.

Speaking at Peking University, Mr Geithner said: “Chinese financial assets are very safe.” The comment provoked loud laughter from the audience of students. There are growing fears over the size and sustainability of the US budget deficit, which is set to rise to almost 13% of GDP this year as the world's biggest economy fights off recession.

China is by far the largest purchaser of US Treasuries and is estimated to hold about 82% of its 2 trillion of foreign reserves in US dollars. In March, Chinese Prime Minister Wen Jiabao said he was “concerned about the safety of our assets,” and since then other high-level Chinese officials have been pushing for alternatives to the dollar as a reserve currency.

However Chinese Vice-Premier Wang Qishan said that the two countries were working closely together to fight the economic crisis underlining the importance of the Strategic and Economic Dialogue which was agreed last April in London by US President Barack Obama and President Hu Jintao.

The strategic track will be chaired by Chinese State Councillor Dai Bingguo and US Secretary of State Hillary Clinton, while the economic track will be chaired by Wang and Geithner, as special presidential representatives.

“Our economic dialogue should be comprehensive, strategic and long-term, strengthen our communication and coordination on hot-button economic issues” Wang said in a statement issued by the Chinese Foreign Ministry. “The major task of the dialogue is to address the global economic slowdown“.

”Through dialogue, we will send a message that China and the US are cooperating substantively to get over the difficult times, which will help boost the confidence, promote global financial stability and world economic recovery,“ Wang said.

”The world has a huge stake in our two countries working closely together to lay a foundation for recovery“ said Geithner.

In his speech at the Peking University, ”The United States and China, Cooperating for Recovery and Growth“ Geithner praised bilateral efforts to tackle the economic downturn.

”These efforts, the combined effect of forceful policy actions here in China, in the United States, and in other major economies, have helped slow the pace of deterioration in growth, repair the financial system, and improve confidence.“

”How successful we are in Washington and Beijing will be critically important to the economic fortunes of the rest of the world,“ he said. Geithner also supported a bigger role for Beijing, which is necessary “for the effectiveness of international financial institutions and for the world economy”.

China and US has become the world’s most important bilateral relationship; it accounts for 31% of world output and a quarter of its trade.