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US needs to have dialogue with China: Hormats

While concerns about slowing growth in China contributed to the recent market selloff, the United States government is doing the right thing by not getting publicly involved in what is an internal issue in China, former U.S. diplomat Bob Hormats said Wednesday.

"The Chinese are going to sort this out. American advice is not welcome and probably would be resisted if we were too vocal about it anyway," the former undersecretary of state for economic growth under President Barack Obama said in an interview with CNBC's "Closing Bell."

However, that doesn't mean there doesn't need to be a dialogue between the two countries, he added.

Poor Chinese manufacturing numbers helped send U.S. stocks tumbling Tuesday in their worst start to a September in 13 years. However, they rebounded Wednesday, closing sharply higher.

Meanwhile, China's market has been in turmoil and is down significantly from its record highs. The government has attempted various interventions to stem the free fall and is reportedly cracking down on those who aren't cooperating with its plan to support equity prices.


While the U.S. may not publicly chime in on China's woes, there will likely be a number of issues raised in private when Obama meets with Chinese President Xi Jinping later this month, said Hormats, now vice chairman of Kissinger Associates. It will be Xi's first state visit to the United States.

"The United States will want to have a better idea of what China's planning to do internally. I think there'll be issues that relate to the exchange rate," he said.

"We need have a stable transition in China. ,,, So the U.S. will be certainly interested in the plans that President Xi has for doing that, particularly for shifting from an investment-led growth economy to one that is more consumer-services led."

He thinks the summit will open up more regular dialogue between high-ranking American and Chinese officials.

—CNBC's Everett Rosenfeld contributed to this report.