China urges U.S. to do all it can to tame crisis

By Glenn Somerville and Zhou Xin

BEIJING (Reuters) - China urged the United States on Thursday to spare no effort to stabilize its economy and financial markets to help avert a global recession.

Speaking at the start of a fifth meeting of the cabinet-level "Strategic Economic Dialogue" between the United States and China, Vice-Premier Wang Qishan said Beijing was doing its part by pursuing fast growth.

"The priority is...to restore investor confidence as quickly as possible, to prevent the financial crisis from getting worse and to avoid a global economic recession," Wang said at the start of two days of talks.

With U.S. Treasury Secretary Henry Paulson looking on, he said Beijing backed U.S. initiatives to steady world markets and had acted responsibly to try to achieve the same goal.

But Wang urged Washington in return to heed Beijing's needs.

"I hope the United States will take all necessary measures to stabilize its economy and financial markets as soon as possible and to ensure the security of Chinese investments and interests in the United States," he said.

It was unclear to what Wang was referring. The two governments are in the midst of what Paulson called "productive" negotiations on a new bilateral investment treaty.

But Wang's comments may also have reflected long-standing concerns in some Chinese circles about Washington's stewardship of the dollar and a constant debate among policy advisers over whether China should add to its hefty U.S. debt holdings.

Beijing holds more than 60 percent of its $2 trillion of reserves in dollar assets, with a big chunk in debt issued by the Treasury and troubled mortgage lenders Fannie Mae and Freddie Mac, which have effectively been taken over by the government.

Senior officials have reiterated that it is in China's self-interest to keep investing in U.S. government securities.

But critics worry that, with Washington pursuing aggressive fiscal and monetary expansion, the value of China's bond holdings will eventually be eroded.

Paulson, who leaves office next month, praised China for its role in trying to tamp down global economic turbulence.

"International cooperation and coordination have been robust, and we appreciate the responsible role China has played during the turmoil," he said.

THANK YOU, CHINA

China has launched a 4 trillion yuan ($586 billion) stimulus package and slashed interest rates to boost domestic demand and take up slack in the economy left by weakening exports.