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U.S., China To Expand Air Travel, Cooperate on Clean Energy

Some progress made on currency and financial issues, U.S. official says

Further liberalization of aviation and financial services and greater collaboration on clean energy technologies are among "tangible results" of high-level bilateral talks between the United States and China, according to U.S. officials.

"These results are like signposts on the long-term strategic road, building confidence and encouraging us to continue moving forward together," U.S. Treasury Secretary Henry Paulson said May 23 at the conclusion of the latest round of the Strategic Economic Dialogue (SED) with China.

A new civil aviation agreement will more than double, to 23, the number of daily passenger flights between U.S and Chinese airports by 2012 and remove most restrictions on cargo flights by 2011. Some of the details of the accord still need to be worked out between the two governments.

The accord falls short of a more comprehensive "open skies" pact the two countries had hoped to negotiate under the provision of a 2004 agreement. Negotiations on a broader pact are to resume in 2011, according to U.S. Transportation Secretary Mary Peters. She participated in the SED along with Paulson and eight other Cabinet-level officials.

"Piece by piece, we are making it easier, cheaper, and more convenient to fly people and ship goods between our two countries," Peters said.

U.S. officials hope stronger bilateral aviation links will accommodate not only growing trade flows but also increasing tourism between the two countries.

Separate negotiations announced at the SED will aim at increasing the number of organized Chinese tours to the United States.

The two countries also vowed to promote the full commercialization of advanced coal technologies, such as the capture and underground storage of carbon dioxide emissions, and agreed to cooperate on capturing and utilizing methane from coal mines. Methane has a number of industrial uses, including power generation and heating. Both carbon dioxide and methane contribute to global warming when released to the atmosphere. (See Climate Change and Clean Energy.)

Financial Sector and Currency Exchange Flexibility

Paulson highlighted new steps that further will open the Chinese financial sector and expand market access for foreign banks and financial firms. For example, China agreed to allow foreign firms to enter its securities industry and foreign banks to issue credit and debit cards denominated in the Chinese currency.

Paulson praised those "incremental" steps but suggested that the reform of the financial sector must be both broader and deeper, and bring in more innovative financial products to make a more significant impact on the entire Chinese economy. He said such reform would facilitate China's transition to a more flexible and eventually floating currency exchange rate.

Paulson said the two sides "have much work to do" because while they agree on many issues in principle, they remain apart on details and timing.

Paulson welcomed a recent decision by China's central bank to widen slightly the band in which its currency - the renminbi or yuan - is allowed to fluctuate. He pressed the Chinese to move faster on reforms.

"The Chinese clearly see the need, and have stated the principle of greater renminbi flexibility," Paulson said.

Faster action on currency flexibility, he said, is important because the issue has become a "symbol of the pace" of economic reforms in China.

U.S. lawmakers have threatened to restrict imports from China unless Beijing allows more meaningful appreciation of the Chinese currency and more aggressively fights intellectual property piracy. Many in Congress believe both issues have contributed to the swelling U.S. trade deficit with China and the loss of manufacturing jobs in the United States.

Before leaving Washington, the Chinese delegation is scheduled to meet the key congressional committees with jurisdiction over trade issues, according to news reports.

The head of the Chinese delegation, Vice Premier Wu Yi, said in her closing remarks that U.S.-China relations require careful handling. Wu is scheduled to meet with President Bush May 24.

"The China-U.S. economic and trade relationship is one of the most complicated in today's world," she said. "It calls for direct consultation and dialogue between us, instead of easy resort to threat or sanctions."

The full text of Paulson's closing remarks and fact sheets on the second meeting of the U.S.-China Strategic Economic Dialogue are available on the Treasury Department's Web site.

For more information on U.S. policies, see The United States and China.

Source: U.S. Department of State