A top Treasury Department official said he was incorrect in saying that the US had ended formal economic dialogue with Beijing, adding that Secretary Steven Mnuchin continues to hold private discussions with China.
“I misspoke,” David Malpass, Treasury’s undersecretary for international affairs, told reporters in Buenos Aires on Sunday. “Secretary Mnuchin has high-level talks with China,” he said, reiterating that the department has “private” conversations with senior officials in China.
Malpass’s remarks came hours after he told a conference in the Argentine capital that Treasury had “discontinued” the US-China Comprehensive Economic Dialogue, a long-standing channel for formal talks between the nation’s finance chiefs. He has said in recent months that the US is “disappointed” with China’s retreat from market reforms, citing the government’s growing influence in the Chinese economy and its autocratic rule.
The retraction created some confusion on Sunday, as the future of the dialogue remains in doubt. Malpass’s comments suggested that the Trump administration was moving away from the formal comprehensive discussions in favour of talks by Mnuchin, but neither Malpass nor Treasury officials would clarify the status of the forum. Malpass declined to say whether Treasury’s office that oversees the economic dialogue between the nations remained open.
But the US Treasury moved quickly to correct the record after Malpass’s initial speech. Tony Sayegh, head of Treasury’s public affairs department, tweeted a correction while on a military flight to Argentina with Mnuchin, saying that comprehensive talks with China have not been “discontinued.”
In his retraction, Malpass said Treasury hasn’t changed its strategy on China. “There hasn’t been a decision on the future of the” dialogue, he added.
Cutting off a leading channel of economic dialogue with China would end conversations started under one of Mnuchin’s predecessors, Hank Paulson, during the George W. Bush administration. Chinese officials have relied on the ritual, which includes annual talks in person hosted in turn by each nation.
“After 10 years of discussions, certainly the US has grown frustrated with the lack of progress” that resulted from the dialogue, said Timothy Adams, president of the Institute of International Finance and a former Treasury undersecretary in the George W. Bush administration. “I don’t fault them for their frustration. They’re looking for different ways of bringing about change of Chinese behaviour,” he said in an interview last week.
Meetings of the first Comprehensive Economic Dialogue under Trump fell apart in July 2017.
The two superpowers were unable to produce a joint statement after Commerce Secretary Wilbur Ross scolded China over its trade imbalance with the US in his opening remarks. Both sides pulled out of the final news conference.
President Xi Jinping in recent weeks sent his top economic adviser, Liu He, to speak face-to-face with Mnuchin.
In that meeting, Liu is said to have asked Mnuchin for a point-person to provide a list of specific demands from China, a sign that Treasury’s shuttering of the formal dialogue process may be hampering any efforts to improve relations.
President Xi Jinping in recent weeks sent his top economic adviser, Liu He, to speak face-to-face with Mnuchin. In that meeting, Liu is said to have asked Mnuchin for a point-person to provide a list of specific demands from China.
Malpass spoke a day before the Group of 20 finance ministers meeting in Buenos Aires, where the Trump administration’s policies to rebalance global trade in its favour will dominate the agenda. The US is imposing tariffs on steel and aluminium imports this week, and is considering clamping down on Chinese investments in the US and imposing additional barriers on a broad range of its imports.
Still, the economic bond runs deep between the two countries. China owns nearly US$1.2 trillion in Treasuries, making it the largest foreign creditor to the U.S. A January report of Chinese officials considering slowing or halting purchases of US government bonds sent yields to its highest level in the preceding 10 months.
At the same time, China is so heavily invested in US public debt that it has an interest in keeping the market healthy, economists say.
One of Mnuchin’s primary aims at the G20 is to gain greater visibility into loans China has made to developing countries. The Trump administration is concerned that Beijing is attempting to extend its influence with the loans while moving away from opening its markets to American goods.
“It seems clear from the tone of the remarks by Malpass today that US engagement at the G20 will be directed at rallying support for US efforts to directly take on some of China’s long-standing business and trade practices,” said Douglas Rediker, a former US representative on the International Monetary Fund’s executive board, who attended Sunday’s conference in Buenos Aires.
“We need to have a balance in the relationship that’s not there now, a reciprocity in terms of investment flows, trade flows and policies,” Malpass said.
One of Mnuchin’s primary aims at the G20 this week is to gain greater visibility into loans China has made to developing countries. The Trump administration is concerned that Beijing is attempting to extend its influence with the loans while moving away from opening its markets to American goods.
“On the positive side, the world is recognising that and beginning to work together. Recognising that having such a big economy in the world move away from markets has not been good for us, for the world,” Malpass said.