U.S. Treasury Secretary Jack Lew was in China Tuesday to meet with new Chinese President Xi Jinping. China marks Lew’s first official foreign trip as treasury secretary. The relationship between the world’s two largest economies has become more antagonistic recently over reports that Chinese hackers (and possibly members of the Chinese government) are allegedly conducting cybersecurity attacks on U.S. firms and banks. Both Lew and Xi affirmed the partnership between the two nations and minimized the cybersecurity concerns.
"The [U.S.] president is firmly committed to building a relationship of growing strength where we cooperate on issues of economic and strategic importance, understanding that we will each have to meet our own responsibilities, but we'll also have to manage our differences," Lew remarked to reporters.
A U.S. official told The Wall Street Journal that Lew’s meeting with Xi focused on the exchange rate, cybersecurity, reducing trade barriers to U.S. investment, intellectual property and North Korea as well as the global economy and the economic situation in Cyprus.
According to Shang-Jin Wei, a professor of finance and economics at Columbia Business School and the director of Columbia's Jerome A. Chazen Institute of International Business, Lew’s trip was important to Chinese leaders.
“This is a brilliant (and a relatively low cost) move to demonstrate the importance of the bilateral relationship,” Wei says.
He argues that the U.S.-Chinese relationship – although fraught at the moment – is mutually beneficial, more so than the two governments may realize.
Each country is “really dependent on the other for selling goods, proving services, exchanging financial assets…they depend on each other,” Wei says in the accompanying clip.
The Chinese will be paying close attention to Lew and his budget policies because of the potential implications to their economy, Wei notes.
“The sustainability of the U.S. debt problem is of enormous concerns to the Chinese, as China is a major holder of U.S. government debt,” Wei emphasizes. “Any hint of U.S. debt repayment problem or U.S. dollar depreciation could mean major financial losses to the Chinese. So the Chinese very much hope that the U.S. can successfully address its debt sustainability problem.”
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