Geithner and China finmin agree need for dialogue

WASHINGTON (Reuters) - Treasury Secretary Timothy Geithner, making his second phone call in three days to a top level Chinese official, signaled that high-level economic dialogue would continue between the two economic powers, the Treasury said on Wednesday.

Secretary of Treasury Timothy Geithner testifying before the Senate Banking, Housing and Urban Affairs Committee in Washington, February 10, 2009. REUTERS/Larry Downing

Three weeks after provoking anger in Beijing by saying President Barack Obama believes China is manipulating its currency, Geithner discussed global economic challenges with Xie and the measures that Washington and Beijing are taking to address them.

“The two officials affirmed the need for continued high level dialogue between appropriate counterparts on both sides to make progress on key economic issues of mutual interest,” the Treasury said in a statement.

The Tuesday night phone call comes after Geithner telephoned China Vice Premier Wang Qishan on Sunday night and emphasized the need to sustain close dialogue and cooperation on macroeconomic, financial and regulatory matters.

Geithner’s predecessor in the top Treasury job, Henry Paulson, launched a series of high-level meetings between U.S. and Chinese cabinet officials called the “Strategic Economic Dialogue”, which worked through trade, energy, environment and product safety issues.

While the SED did not produce major breakthroughs in exchange rate policy or U.S. access to China’s financial services market, some economists credit it with contributing to a gradual rise in China’s currency against the dollar between late 2005 and the middle of 2008.

The Obama administration has not said whether it intended to continue the SED in its previous form, and some feared that Geithner’s comments about yuan manipulation signaled a tougher stance on China trade and currency matters from the Obama administration.

Although the Bush administration had argued that the yuan needed to rise in value to help ease global trade imbalances, it refrained from using the “manipulator” label against Beijing in semi-annual currency reports.

The Treasury also confirmed that Geithner on Wednesday will meet with public- and private-sector representatives to discuss the Obama administration’s efforts to mitigate home mortgage foreclosures. He will be joined in the meeting by Housing and Urban Development Secretary Shaun Donovan.

On Tuesday, Geithner said the Treasury would devote $50 billion of its remaining $350 billion in financial rescue funds to home mortgage foreclosure mitigation and said the Fed and Treasury were committed to driving down mortgage rates.

Reporting by David Lawder; Editing by Theodore d’Afflisio