Geithner urges joint US-China economic overhaul; GM declares bankruptcy; North Korea prepares for new missile test; Pakistan lifts some curfews in Swat; and more
Top of the Agenda: Geithner in China
Timothy Geithner, in his first trip to China as U.S. Treasury Secretary, presented a plan for the United States and China to work together to rebuild the global economy and restore growth. In a speech today at Peking University, Geithner stressed that there is much that both Washington and Beijing need to do to rebalance the world economy. He called for China to make its currency more flexible (FT) in exchange for fiscal reforms in the United States. He also said China would need to diversify its economy (NYT) beyond relying so heavily on exports for growth, and that Washington, in return, would focus on mitigating its ballooning deficit to protect massive Chinese investments in U.S. government debt. In short, the Wall Street Journal reports, Geithner's speech was an appeal for both countries to "overhaul their economies" and establish a rebalanced global economic order.
Chinese media focused on Geithner's implication that Beijing should play a more substantial role (CCTV) in global economic policymaking. China Daily says the primary goal of Geithner's trip, which has included meetings with several leading Chinese economic policymakers, has been to reaffirm Beijing's faith in U.S. dollar-backed assets and allay concerns that Washington's budget deficit and loose monetary policy will prompt inflation, undermining Chinese holdings of both the U.S. dollar and U.S. Treasury bonds.
Bloomberg notes that despite "hand-wringing," demand for U.S. financial assets is in fact as high as ever.
The economic backdrop in Washington is somewhat gloomier today, however, given the imminent bankruptcy of General Motors, the U.S. automaker. The Washington Post reports the U.S. government will push GM into bankruptcy today and will take a 60 percent stake in the company under a restructuring plan that some company investors say unfairly favors the United Auto Workers union. In separate auto industry news, a judge cleared Chrysler (Reuters) to sell nearly all of its assets to a group led by the Italian automaker Fiat. The Journal reports Ford is hoping to gain from its rivals' pain.
Background and Analysis:
- Here is the text of Geithner's speech.
- In an op-ed, CFR's Sebastian Mallaby says China has rapidly shifted from a "diffident player in international finance" to an "impatient table-banger"--and that rhetoric so far reflects poorly on China's leaders.
- In a recent blog post, CFR's Brad Setser argues China may have even more currency holdings than is commonly thought.
PACIFIC RIM: North Korea Missile Questions
The Korea Times reports this morning that North Korea appears to be accelerating its preparations to test-fire an intercontinental ballistic missile, potentially further heightening tensions after Pyongyang's recent nuclear test.
At a special summit, South Korea and the southeast Asian bloc ASEAN jointly called (Yonhap) on North Korea to give up its nuclear ambitions.
ECONOMY: The FT reports South Korean exports plummeted 28 percent year-on-year through May, worse than expected.
Pakistan lifts some Swat curfews opening way for civilians to flee area.