The Democrats are putting a lot of pressure on President George W. Bush and his administration to force changes in China’s trade and monetary policies. Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke are visiting the Asian giant this week, and they’ve arrived with a list of demands for the Chinese government: open the capital markets, start to protect intellectual property, and be more transparent in government. The problem is a lot of people – even Paulson – have low expectations for the trip.
Mickey Kantor was treasury secretary and U.S. trade representative under President Bill Clinton. He spoke with Maria Bartiromo on “Closing Bell” today. As far as he’s concerned, the pressure the Democrats are putting on President Bush is “only the tip of the iceberg.” He says it’s only going to get more intense.
The capital markets are a particular sore spot. Bankers in the U.S. are saying that access to Chinese IPOs isn’t enough. They want to be able to trade stocks and provide advisory services. James Barth, a senior fellow and economist at the Milken Institute, says that will happen – but slowly over time. He’s in line with China’s reluctance to jump at reform. Any brash moves could put China’s economy at risk.
But how long will it take for China to become a purely market-driven economy? “Longer than we want, but probably sooner than we think,” says Kantor.
It seems to come down to timing. Even Paulson himself said during his interview with Maria Bartiromo last week that both the U.S. and China agree on what needs to be done – just not the timeframe in which to do it. Paulson said the trip this week is more about long-term changes than the more immediate demands coming from Congress.