Geithner says U.S. will shrink it's budget deficit and is committed to strong dollar, do you think China believes him?.-Lou
Geithner Tells China U.S. Will Tackle Budget Deficit
June 1 (Bloomberg) -- Treasury Secretary Timothy Geithner told China that the U.S. wants to shrink its budget gap as soon as an economic recovery takes hold, reassuring the nation that is the biggest holder of U.S. government debt.
The U.S. goal is a deficit of “roughly 3 percent” of gross domestic product from a projected 12.9 percent this year, Geithner reaffirmed today in a speech in Beijing.
Geithner’s maiden visit to China as treasury secretary aims to deepen cooperation in dealing with the global financial crisis in meetings with Premier Wen Jiabao, President Hu Jintao and Vice Premier Wang Qishan. U.S. government debt has this year handed investors the worst loss since at least 1977 on forecasts for ballooning deficits and Wen has expressed concern about the “safety” of China’s dollar assets.
“The Chinese public is worried about the safety of its foreign-exchange reserves,” said Yu Yongding, a senior researcher at the government-backed Chinese Academy of Social Sciences and a former central bank adviser. “If America fails to adjust its economy by increasing its saving rate and reducing its current account deficit another financial crisis triggered by a dollar crisis could be inevitable,” Yu said in an e-mail.
China held about $768 billion of Treasuries as of March.
For the fiscal year that ends Sept. 30, the U.S. deficit is projected to reach a record $1.75 trillion from last year’s $455 billion shortfall, according to the Congressional Budget Office.
‘Sustainable’ Deficit
Geithner said that China’s investments in U.S. financial assets are very safe, and that the U.S. is committed to a strong dollar.
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