December’s Strategic Economic Dialogue (SED) between China and the US was complicated by unpleasant trade data. China’s imports fell 20% year-on-year in November while exports posted a 2.2% deficit, the first contraction in seven years.
Shortly after the figures were released, China allowed its currency to post its largest decline in value against the US dollar in three years, alarming US policymakers.
Some saw the devaluation as evidence that China intends to export its way out of the economic crisis, to the detriment of its largest trading partner. China responded at the SED by lecturing the US to pay more attention to its own economy, including its trade deficit and low savings rate.
Rhetoric aside, pragmatic cooperation continued. The SED produced some 40 agreements on trade, investment, and environmental protection.
China and the US agreed to inject US$20 billion in finance for "creditworthy importers" in both countries, to jointly resist protectionist sentiment, and to continue pushing the Doha Round forward.
The US committed to allowing continued Chinese investment in US markets, including sovereign wealth fund (SWF) investment. For its part, Beijing will allow US banks in China to trade bonds on the inter-bank market and, in "exceptional circumstances," increase their liquidity.
Both sides also agreed to improve implementation of existing bilateral agreements regarding product safety issues.
Shortly after the SED concluded, the renminbi regained most of the value it lost since its precipitous devaluation.