China Agrees to Eliminate Indigenous Innovation Catalogues in S&ED Talks, Etc.
According to the Treasury Department, the U.S. and China made progress on priority issues during the third meeting of the Economic Track of the U.S.-China Strategic and Economic Dialogue (S&ED) which took place on May 9-10, 2011. China pledged to take actions that will provide greater market access for U.S. firms, ensure greater protection and enforcement of intellectual property rights, deepen financial sector reforms, and promote greater Chinese domestic consumption and imports through policy shifts, including greater exchange rate flexibility.
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Among other things, China pledged to do the following:
Eliminate Procurement Indigenous Innovation Catalogues, Revise Draft Procurement Law
China pledged to eliminate all of its government procurement indigenous innovation products catalogues and revise Article 9 of the draft Government Procurement Law Implementing Regulations as part of its implementation of President Hu's January 2011 commitment not to link Chinese innovation policies to government procurement preferences.
Require 30 Day Comment Period on Trade/Economic Regulations
According to Treasury, China pledged to issue a measure this year requiring that all proposed trade- and economic-related administrative regulations and departmental rules be published on the State Council Legislative Affairs Office website for a public comment period of not less than 30 days from the date of publication, subject to limited exceptions.
Strengthen Inspection of Software Used by Government Agencies, Etc.
China pledged to strengthen its government inspection mechanism to make sure that the software being used by government agencies at all levels is legitimate and to strengthen cooperation on software legalization in the JCCT.
Improve IPR Protection and Enforcement Building on Current Campaign
China pledged to improve its high-level, long-term intellectual property rights (IPR) protection and enforcement mechanism, building on the current Special Campaign Against IPR Infringement and Fake and Shoddy Products.
Raise Share of Services in Economy by Four Percentage Points in 5 Years
China pledged to raise the share of the services sector in China’s economy by four percentage points over the next five years. China also committed to further open the service sector to U.S. and other foreign involvement, and to encourage capital investment in services by both public and private firms.
Expanded Opportunities for U.S. Financial Service Firms
China also committed to continue and extend financial sector reforms as part of its new Five-Year Plan for the economy. Among other things, China committed to allow U.S. and other foreign banks incorporated in China to sell mutual funds, obtain licenses to act as mutual fund custodians, and act as Margin Depository Banks in Qualified Foreign Institutional Investor (QFII) futures transactions. China also pledged to advance toward allowing U.S. and other foreign insurance companies to sell mandatory third-party liability auto insurance in what is now the world’s largest market for automobiles. In addition, China is now moving to allow foreign banks to underwrite corporate bonds in the interbank bond market.
Continue Greater Exchange Rate Flexibility
Since last June, the renminbi has appreciated against the dollar by more than five percent and at an annual rate of about ten percent when China’s higher inflation is taken into account. China’s leaders increasingly acknowledge the importance of currency appreciation as a tool to fight inflation and have committed to promote greater exchange rate flexibility. However, more rapid exchange rate adjustment will help bring down inflation in China.
China has recently begun to take steps to make the renminbi an internationally traded currency, and China is committed to the goal of further internationalizing the renminbi. This is a significant policy choice, one which will require more open capital flows into and out of China, and more market-based interest and exchange rates.
Increase Domestic Consumption by Raising Worker Pay
China committed to take steps to increase domestic consumption, including raising household incomes at a pace faster than GDP growth, and ensuring that workers’ pay keeps up with increases in productivity.
(See press releases for more details, including U.S.-China discussions on competitive neutrality for private firms and state-owned enterprises; the importance of transparency and fairness in providing export credits; etc.)
Treasury Dept. fact sheets, dated 05/10/11, available here, here, and here.
Sec. of State Clinton’s remarks, dated 05/10/11, available here.
Vice President Biden’s remarks, dated 05/09/11, available here.
State and Treasury Secretaries' remarks to press and concluding remarks, dated 05/10/11, available here and here