U.S. Trade Representative Robert Zoellick says China must press ahead with financial reforms, or face slower growth and higher unemployment. Mr. Zoellick is winding up three days of meetings with Chinese officials and business leaders.
The top U.S. trade official says China's economic growth will slow unless it modernizes its financial system. Without a rational system for allocating capital, good companies can't get the loans they need to grow and create badly needed jobs in China. But China's banks are burdened with massive numbers of loans that are unlikely to be repaid, and that is stalling reform.
Trade Representative Robert Zoellick says China's banks must take the painful step of selling the assets that back the bad loans. He admits this is hard because some of the companies were "the crown jewels of the old economy," and the sales mean many people will lose their jobs. But as Mr. Zoellick told economics students Tuesday, officials must make tough decisions or risk even ever-rising unemployment. "China still is suffering from the old system," he said. "It needs to be able to move more quickly to have competition in banks and securities and overall venture capital so that entrepreneurs and business people can create jobs to hire people because some people are going to lose jobs in state-owned enterprises and others."
After meetings with many of Beijing's top economic officials, Mr. Zoellick said China is moving forward on reforms required by its new membership in the World Trade Organization. But he says there are still problems in areas such as tariffs, express mail, insurance, and information technology.
Mr. Zoellick says China has made great strides toward protecting patents and copyrights, but he noted it is still easy to find people selling pirated foreign movies, CDs and software on street corners. He says the problem hurts China by discouraging foreign investment and Chinese innovation.
Mr. Zoelleck heads next for Japan, where he will discuss banking sector reforms, trade, and economic issues.