U.S.-China trade imbalance not sustainable: Locke

By Doug Palmer

BEIJING (Reuters) - The trade imbalance between the United States and China is not sustainable, and the two countries have a joint responsibility to reduce greenhouse gas emissions, U.S. Commerce Secretary Gary Locke said on Wednesday.

China should shift from export-led growth, increase its exchange rate flexibility, and open its markets more, Locke said in remarks prepared for a speech to the American Chamber of Commerce.

Locke, who will visit Beijing and Shanghai, plans to promote clean energy technology as one area in which U.S. industry can find opportunities in China.

"For all our areas of agreement, the United States and China's trade relationship has to evolve. There are concerns and deep structural issues that must be addressed," Locke said.

"Chief among them is a bilateral trade imbalance that simply can't be sustained. Growth predicated on ever increasing Chinese exports being consumed by debt-laden Americans provided years of prosperity -- but it also sowed some of the seeds for our current economic problems."

The United States is China's second-largest trade partner after the European Union, and accounts for 18 percent of China's total exports and imports.

"There do exist some issues in our bilateral trade relations, including cooperation on high-tech products," Chinese commerce ministry spokesman Yao Jian told a press conference on Wednesday.

China's big surplus in its trade with the United States has become a global concern, he said.

"Of course, it's a separate issue as how to interpret the trade surplus. In a globalised world today, trade surplus does not necessarily mean trade benefits," Yao said, pointing out that China mainly exports labor-intensive products.

"China is trying to promote trade balance. We have special working groups that are in talks with the U.S. side on promoting trade balance and cooperation on high-tech products."

RESTORING BALANCE

President Barack Obama will seek to restore balance in the two countries' trade, Locke said, noting that the U.S. trade deficit with China last year set a record near $270 billion.

Locke praised China for taking steps to stimulate its domestic economy, but said it could help the world economy even more with further reforms.

"If China allowed for greater flexibility in its exchange rate and further opened up its domestic markets for imports and foreign direct investment, it would accelerate the world's return to growth."

Locke, who is making his first trip to China as a member of the Obama administration along with U.S. Energy Secretary Steven Chu, said it was vital the United States and China work together to reduce greenhouse gases blamed for global warming.