•Bernanke Said to Be Enlisted to Assuage China's Concerns on U.S. Economy

Discussion in 'Economics' started by ByLoSellHi, Jul 16, 2009.

  1. Somebody's nervous....who could it be?

    Bernanke Is Said to Plan Assuring China at Summit (Update1)
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    By Mark Drajem

    July 16 (Bloomberg) --
    Federal Reserve Chairman Ben S. Bernanke will brief Chinese officials at a summit this month about how the U.S. plans to keep inflation in check over the next few years, according to people advised on the plans.

    David Loevinger, a U.S. Treasury official coordinating the meeting, told business lobbyists and lawyers in Washington yesterday that the Obama administration was enlisting Bernanke to try to assuage Chinese concerns about long-term U.S. economic health, people at the meeting said on condition of anonymity.

    The summit is the first high-level gathering of its kind since President Barack Obama took office this year, and follows Chinese officials’ concern at U.S. monetary expansion and record budget deficits. At stake is continued demand by China, the largest foreign investor in Treasuries, for the unprecedented issuance of American government debt.

    The U.S.-China Business Council organized the off-the- record meeting with Loevinger. John Frisbie, the council’s president, declined to comment, citing those ground rules.

    A Treasury official said the department anticipates an exchange of views on economic policies at this month’s gathering with the Chinese, and discussions about each nation’s response to the global financial crisis.

    Fed spokeswoman Michelle Smith didn’t respond to a request for comment.

    Bernanke on Yuan

    Bernanke participated in previous summits during the Bush administration, including a meeting in Beijing in December 2006 in which he labeled China’s currency policy a “distortion” and urged it let the value of the yuan appreciate.

    This time, his role will differ as he describes U.S. policies and the strategy meant to ensure that increased government spending and the Fed’s interest-rate stance won’t lead to long-term economic or financial woes, the people said.

    Since the U.S. financial turmoil last year, and the unveiling of the Obama administration’s $787 billion stimulus program, Chinese officials have expressed concern about the prospects for the country’s economy and the health of their investments.

    “We have lent a massive amount of capital to the United States, and of course we are concerned about the security of our Assets,” Chinese Premier Wen Jiabao said during a March 13 press conference. “To speak truthfully, I do indeed have some worries.”

    Loevinger had been working from Beijing as the Treasury’s first permanent representative in China before being tapped to direct the Strategic and Economic Dialogue by Treasury Secretary Timothy Geithner.

    President Hu Jintao and Obama agreed in April to establish a strategic and economic dialogue that will start in Washington July 27-28. Geithner and U.S. Secretary of State Hillary Clinton will host Vice Premier Wang Qishan and Dai Bingguo, a state council member.

    To contact the reporter on this story: Mark Drajem in Washington at mdrajem@bloomberg.net
    Last Updated: July 16, 2009 18:28 EDT