Wu, Paulson face uphill battle in U.S.-China talks

WASHINGTON – As U.S. Treasury Secretary Henry M. Paulson Jr. and Chinese Vice Premier Wu Yi this week ponder ways of easing tension between the two nations and curbing China’s runaway growth, comments by local leaders indicate the extent of the challenges they face, according to Bloomberg News.
“At the regional level, if you don’t report high growth it’s hard to get a promotion,” explained Wilson Gong, a spokesman for the coastal province of Zhejiang. Huang Yong, Zhejiang’s economic policy chief, boasted to Bloomberg of the wealth that textile and shoe manufacturing have brought the region; the next step, he said, will be developing industries like petrochemicals, pharmaceuticals and steel.
Yet the Chinese government has been trying since 2003 to reduce excess production capacity in steel, cement, aluminum, autos and other industries. And as Wu was on her way to Washington, China’s Finance Ministry was announcing an export tax of as much as 15 percent on steel slab as and 10 percent on steel wire and rods, citing a need to reduce exports of “energy consuming, polluting and resource-intensive products.”
The problem was summed up by Jonathan Anderson, chief Asia economist for UBS AG in Hong Kong, who told Bloomberg: “As long as producers have the support of local governments, who are most worried about employment and growth in their own back yards, they will find ways to put the central government off.”
Yet with China’s trade surplus expected to top $200 billion this year, its leading stock index up more than 87 percent since December and two interest-rate hikes this year having failed to cool the growth, both parties are under pressure. Paulson opened their talks by saying results are needed to curb “anti-China sentiment,” Bloomberg said, though Wu countered that Americans should not blame China for their own economic problems.