China and the United States have agreed to beef up their cooperation in the financial service sector during the third strategic economic dialogue that ended at a resort outside Beijing Thursday.

 

China pledged to examine its policy on foreign participation in domestic securities firms and come up with recommendations on new ceilings of foreign ownership, according to a joint fact sheet circulated after the dialogue.

 

A similar study on foreign ownership of Chinese banks is already going on and will be completed by the end of 2008. New recommendations shall also be given to maximum foreign ownership.

 

Qualified foreign-invested companies, including banks, will be allowed to issue RMB denominated stocks and bonds.

 

Shortly before the dialogue, China raised the quota for qualified foreign institutional investors, which allow foreign mutual funds to invest in China's domestic stock market, from 10 billion U.S. dollars to 30 billion U.S. dollars.

 

In return, the U.S. government said it remains committed to applying national treatment to Chinese banks and broker-dealers seeking to open branches or register and operate in the United States.

 

The United States will apply "the same prudential standards to all applications by foreign banks to establish branches or subsidiaries or to acquire stakes in existing U.S. baking institutions," the joint fact sheet said.

 

U.S. Treasury Secretary Henry Paulson called this progress "moderate", affirming that opening China's financial markets to foreign competition strengthens the financial backbone of the Chinese economy. "It's critical to China's goals of spreading the benefits of growth to all Chinese people," he said.

 

Playing down the disputes on the speed of the yuan's appreciation, Paulson said "we didn't spend a lot of time talking about how fast is fast." A statement of the U.S. delegation recognized China's progress in its gradual yuan appreciation policy: "The RMB has appreciated 12.2 percent since July 2005, and in the past year the annual pace of appreciation has accelerated from 3.4 percent in 2006 to 6.1 percent in 2007 year to date."

 

Chinese Vice Commerce Minister Chen Deming made it clear Wednesday that China was not against yuan appreciation, but stressing that a rapid appreciation of China's currency would hurt its economy, which would not be positive for the world.

 

Chen, instead, expressed concern over the continued depreciation of the U.S. dollar, which he said would "drive up oil and gold prices and reduce the assets of the countries or companies that hold the currency."

 

(Xinhua News Agency December 14, 2007)