By FELICIA SCHWARTZ and MARK MAGNIER
BEIJING—The U.S. and China made little progress on a series of disagreements during two days of high-level economic and security talks, as both countries prepare for leadership change and further economic uncertainty.
Statements by officials from both sides on Tuesday suggested mostly incremental results from the dialogue. U.S. Treasury Secretary Jacob Lew said Chinese officials reaffirmed a commitment not to devalue an already weakening yuan for competitive purposes and pledged not to “target” an expansion of the steel industry, whose surging production he previously called market-distorting.
Beijing widened access to its tightly regulated financial markets, offering U.S. investors a quota of 250 billion yuan ($38.1 billion) to buy Chinese stocks and bonds. The two governments agreed to designate clearing banks in the U.S. for settling yuan transactions, a move that would promote greater use of the Chinese currency. Mr. Lew said it was too early to say which U.S. financial institution might be chosen but said the U.S. will have the second-largest quota after Hong Kong.
On the more contentious issues in the relationship, the senior officials appeared to restate positions and, in some cases, outright disagree. A new Chinese law that grants police the authority to monitor foreign nonprofits provoked sharp differences.
This year’s meeting of the Strategic and Economic Dialogue is the last for the Obama administration, with the U.S. presidential election approaching. China soon will face its own important leadership transition. In 2017, five of the seven members of the Politburo Standing Committee, China’s top decision-making body, are due to step down.
The timing of the meetings, combined with tensions over the South China Sea—where the U.S. is challenging Beijing’s assertion of sovereignty over islands, reefs and surrounding waters claimed by other countries—limited prospects for breakthroughs on issues such as trade and investment barriers and China’s currency policy.
Secretary of State John Kerry and his co-chair, State Councilor Yang Jiechi, stuck to their talking points on the South China Sea. Mr. Kerry voiced concerns about unilateral steps “by any party”—a reference to land reclamation by China—and he said the claimants should exercise restraint. He said the U.S. supports “a peaceful resolution based on the rule of law.”
Mr. Yang urged the U.S. to “honor its promise” not to take sides in the territorial disputes and said China has the right to uphold its territorial rights in the contested waters. He reiterated that Beijing won’t recognize a coming ruling from an arbitration panel in The Hague on a suit brought by the Philippines against China’s claims—a case the U.S. has supported.
The recently passed law restricting foreign NGOs also clouded the talks. A U.S. official said the law was a serious focus throughout, and that the discussions were tense.
“We could not have registered our concerns more directly or more forcefully,” Mr. Kerry told reporters at a press conference Tuesday evening.
In response to U.S. concerns, Mr. Kerry said he received assurances from Chinese President Xi Jinping in a meeting Tuesday that the law wouldn’t be applied “in any way whatsoever that affects the ability to open up and to do business and for people to feel confident about what they’re doing here.” He added: “Now the question is, is that in fact what happens.”
Mr. Yang said at the close of the meetings that the law would provide better protections for such groups, and as long as they abide by that and other laws, they “will not be affected in any way.” But the law, as it is written, would be hard for most nongovernmental organizations to fully comply with, the U.S. official said. It requires notice of meetings, for example, a year in advance.
Given the divisions, the discussions yielded limited progress, though officials from both countries stressed areas where they have been working together, including on climate change and nuclear nonproliferation. The U.S. has pressed China to put more pressure on North Korea to give up its nuclear program.
Mr. Kerry said Washington and Beijing committed to fully enacting United Nations Security Council sanctions on Pyongyang passed earlier this year, and that experts from both countries would meet to cooperate on full implementation. Mr. Yang said China is committed to denuclearizing the Korean Peninsula.
The two sides agreed to accelerate negotiations on an investment treaty between the world’s two largest economies, after years of discussion.
Chinese negotiators will submit a revised offer delineating which sectors are off limits for foreign investment later this month, Vice Premier Wang Yang said. China’s previous offer of a “negative list” contained more than 40 sectors and was deemed overly broad by Washington. Trade experts don’t expect a treaty to be concluded before Mr. Obama leaves office.
As a positive, Mr. Lew cited China’s pledged restraint on expanding its steel industry, though, he said, similar assurances weren’t given for other industrial sectors. “Regrettably we were not able to come to common understanding of the global aluminum excess capacity situation,” Mr. Lew said, adding that other nations were likely to raise their concerns at a Group of 20 economies meeting hosted by China in September. “These are international issues, they’re not just U.S. concerns,” he said.
Mr. Lew said Beijing promised to work to wind down “zombie companies”—those businesses that are unprofitable but kept afloat and whose production adds to the glut of industrial goods on global markets. He said that reducing excess capacity was needed to foster sustainable economic growth and reduce “distorting effects on global markets.”
The talks come as both nations prepare for leadership change that adds uncertainty to U.S.-China ties. China has become a focus of concern in the U.S. presidential race over trade deals and lost jobs, even as Beijing grapples with slowing growth and rising labor protests. “U.S. presidential elections are usually difficult for China relations,” said Derek Scissors, fellow with the American Enterprise Institute and an adjunct professor at Georgetown University. “This one will be worse, since the Republican candidate is not constrained by free-trade principles.”http://www.wsj.com/articles/u-s-china-talks-limited-by-disagreements-1465300155
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