The Trump administration ended a decade-old formal economic dialogue with China because it believes the country is moving backward on opening its markets to foreign competition, a top Treasury Department official said Sunday.
The administration is “disappointed” with China and “because there wasn’t a path back toward a market orientation, I discontinued the China economic dialogue,” said David Malpass, Treasury’s undersecretary for international affairs. Rather than holding formal discussions, Secretary Steven Mnuchin has frequent private talks with senior-level officials in China to bring back focus to free-market capitalism, he said.
“One of the things we are doing is trying to keep open lines of communication with them even as we express concern” about the growing influence of China’s state-owned enterprises, Malpass said, speaking in Buenos Aires ahead of the Group of 20 finance ministers meeting.
Mnuchin’s halting of the main economic channel between the U.S. and China—known as the Comprehensive Economic Dialogue—ends conversations started under one of his predecessors, Hank Paulson, during the George W. Bush administration. Paulson singled out an economic track for the Treasury Department to lead, becoming the point-person on all such matters between the nations.
The first Comprehensive Economic Dialogue during the Trump administration fell apart in July 2017. The two super-powers were unable to produce a joint statement after Commerce Secretary Wilbur Ross scolded China over its trade imbalance with the U.S. in his opening remarks. Both sides canceled a planned closing news conference.
“After 10 years of discussions, certainly the U.S. has grown frustrated with the lack of progress” that resulted from the Comprehensive Economic Dialogue, said Timothy Adams, president of the Washington-based 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 behavior,” he said in an interview earlier this month.
President Xi Jinping in recent weeks sent his top economic adviser, Liu He, to meet 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 the process. Liu pointed out that different U.S. administrations have wanted various things, the person said, with Bush focused on monetary policy and Obama emphasizing investment.
Malpass said on Sunday the U.S. wants to work with other nations to come up with a united response to what America sees as China’s foot dragging on economic changes, ranging from reforming state-owned enterprises to curbing the ruling party’s role in the economy.
“Above all, their markets are not reciprocal in the sense that there’s not an ability for other countries to work in China the way that China works in elsewhere,” Malpass said later Sunday in a Bloomberg TV interview. He highlighted a risk for the world from China’s autocratic rule.
The new rhetoric contrasts with the more collaborative approach of both the George W. Bush and Obama administrations, who courted China as an economic partner even as the U.S. asserted its military power in Asia.
President Donald Trump has broken with recent U.S. convention by portraying China as a rival that wants to undermine American prosperity. The administration is considering clamping down on Chinese investments in the U.S. and imposing tariffs on a broad range of its imports to punish Beijing for its alleged theft of intellectual property.
One of Mnuchin’s primary aims at the G-20 this week is to gain greater visibility into loans China has made to developing countries. The Trump administration is concerned that the U.S.’s top strategic rival 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 recognizing that and beginning to work together. Recognizing that having such a big economy in the world move away from markets has not been good for us, for the world,” Malpass said.