China needs more market-determined economy, Lew says

U.S. Treasury Secretary Jacob J. Lew called on China to adopt more market-oriented policies and drew a distinction between industrial espionage and the cyber warfare and spying that governments undertake.

China’s transformation and the U.S. recovery will be the focus of talks between the world’s two largest economic engines scheduled in Washington the week of July 8. Chinese theft of trade secrets from American companies will also be high on the agenda, Lew said at a conference in Aspen, Colorado, yesterday.

“There are always going to be challenges between the U.S. and China,” Lew said in response to questions from a moderator. The Chinese “fundamentally have to move from a place where they have a very rigid, structured support for old industries, and go to more market-determined interest rates, market-determined investment policies, opening their markets more to international investment,” he said.

The talks hosted by Lew and Secretary of State John Kerry with their Chinese counterparts will occur after the U.S. last month charged Sinovel Wind Group Co., a Chinese wind-turbine company, with stealing trade secrets from its former U.S. supplier. Earlier in June, Edward Snowden, an American accused of revealing secret U.S. surveillance programs, was allowed to depart Hong Kong for Moscow.

Snowden, a former worker for government contractor Booz Allen Hamilton Holding Corp., disclosed top-secret U.S. National Security Agency programs that collect phone and Internet data. He fled to Hong Kong and then Moscow as the Obama administration called for his extradition.

‘Different’

“The theft of intellectual property, trade secrets, state-owned enterprises that have relationships that benefit from those activities -- this is different than other kinds of issues in the cyber area,” Lew said yesterday.

China is also facing an economic slowdown. China’s manufacturing expanded at the slowest pace in four months as a cash squeeze in the banking system reduced the flow of credit to companies. The Purchasing Managers’ Index was at 50.1, the National Bureau of Statistics and China Federation of Logistics and Purchasing said today in Beijing.

China International Capital Corp. on June 24 cut its forecast for expansion in Asia’s biggest economy this year to 7.4 percent from 7.7 percent, while Goldman Sachs Group Inc. lowered its projection to 7.4 percent from 7.8 percent. Growth held below 8 percent for each of the past four quarters, the first time that has happened in at least 20 years, official data show.

U.S. Expansion

Describing the U.S. economy, Lew said it’s shown resilience and strength, and while it won’t grow as fast as the pace it reached in the 1990s, it can accelerate more than in 2013. This year’s expansion has been limited by tax increases and federal spending cuts, he said.

“Next year we’re not going to have that kind of, you know, headwind, coming from federal fiscal policy,” Lew said. “So we could do a lot better.”

U.S. gross domestic product expanded at a revised 1.8 percent annualized rate from January through March, down from a prior estimate of 2.4 percent, figures from the Commerce Department showed June 26.

Given the fiscal restraints, growth will average 1.9 percent in 2013, and accelerate to 2.7 percent in 2014, according to the median forecast of economists surveyed by Bloomberg last month.

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