September 18, 2003	Thursday	Rajab 20, 1424

SHANGHAI, Sept 17: China needs to accelerate the opening of its economy to offset increasing trade tensions with the United States, former US trade representative Charlene Barshefsky said here on Wednesday.

“The country has to take action if it wants to maintain positive relations with the US,” warned Barshefsky, who led US negotiations in China’s WTO accession in late 2001.

“It is important for China to fully implement all its WTO obligations, and the leadership should think about accelerating some,” she said at the ongoing 2003 Forbes Global CEO Conference in Shanghai.

Barshefsky, now a senior international partner at law firm Wilmer, Cutler and Pickering, highlighted the bloated banking sector as China’s top priority for reform.

Stuart Gulliver, chief executive of Corporate, Investment Banking and Markets at HSBC, agreed there needed to be further reform but it was “absolutely understood and absolutely seen by (China’s) policy makers.”

“The irony (of China’s banking debt problem) is there is a fantastic large amount of savings in the banking system and a very large number of non-performing assets, the issue is resolving one and unlocking the other,” Gulliver said.

On the increasingly controversial issue of the value of the Chinese yuan, Barshefsky said China would “have to look at taking action to help re-balance the yuan,” which she said was one way to help diffuse current economic tensions.

But Gulliver argued that due to the major impact to its banking system it was more important for China to keep the yuan stable.

“The currency should remain stable because you can only reform against stability,” he said.

Many economists and particularly US trade groups argue the yuan is grossly undervalued and as a result Chinese exports are unfairly competitive.

For her part, Barshefsky warned China’s exporters to be more sensitive toward US economic interests. She said the US’ weak jobless recovery and upcoming presidential elections allied to America’s yawning trade deficit with a rapidly industrializing China, could feasibly result in increasingly protectionist measures being taken against Chinese exporters.

Trade relations with China have emerged as a potentially more volatile issue in US presidential elections next year, with the Bush administration steadily increasing its rhetoric as domestic political pressures build.—AFP