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POLITICAL ECONOMY
China's Xi tells US Treasury chief of 'shared interests'
by Staff Writers
Beijing (AFP) March 19, 2013


Outgoing BoJ chief Shirakawa says failed on deflation
Tokyo (AFP) March 19, 2013 - The Bank of Japan's outgoing governor on Tuesday acknowledged he failed to end the country's long-running deflation, but pointed to better times ahead as he steps down from the post.

Masaaki Shirakawa, 63, leaves the job about three weeks before the official end of his term after sparring with Prime Minister Shinzo Abe over policies aimed at stoking the world's third-largest economy.

Abe pressured BoJ policymakers for aggressive easing and other measures to stoke growth, while the central bank has also faced criticism from incoming Governor Haruhiko Kuroda, who himself has pledged to reverse years of falling prices that crimped private spending and corporate investment.

Shirakawa's tenure faced one crisis after another, including the 2008 collapse of Lehman Brothers that sent the world economy into a tailspin, and the eurozone debt crisis that helped push up the value of the safe-haven yen, hurting Japan's exporters.

The country was also hammered by the earthquake-tsunami and subsequent nuclear crises in 2011, damaging Japan's manufacturers.

"The Japanese economy experienced serious downturns due to a number of significant events, including the Lehman shock, the European debt crisis and the (quake-tsunami)," he told a parliamentary committee on Tuesday.

"Despite our utmost efforts, unfortunately we have yet to bring the economy back to a path of sustained recovery with stable prices," he added.

Shirakawa said that a "proactive" government approach to economic growth would help turn around Japan's fortunes, and pointed to a cautious recovery in the US and China.

"I believe the Japanese economy will be revived again," he said.

Shirakawa's appointment in 2008 was sparked by a crisis that saw a deeply divided parliament unable to agree on a BoJ governor, leaving the post vacant for weeks with the job ultimately given to the soft-spoken deputy governor.

Despite criticism that he was too cautious on battling deflation, Shirakawa was credited with keeping Japan's financial system relatively stable through 2008 and 2009 when the international banking system came to a near collapse.

Shirakawa, whose two deputies are also stepping down Tuesday, was to give a press briefing at 3:30 pm local time (0630 GMT). The BoJ's new management team was expected to take up their posts on Wednesday.

Beijing and Washington have "enormous shared interests", China's new President Xi Jinping told the US Treasury chief on Tuesday in his first major diplomatic meeting since taking office.

The world's two largest economies increasingly compete for global political influence as Beijing expands its presence in regions such as Africa, while sometimes acting as a counterweight to Washington in the Middle East.

Tensions have also risen following US allegations that China has engaged in hacking against US companies and institutions.

"In the China-US relationship, we have enormous shared interests but of course, unavoidably, we have some differences," Xi told Treasury Secretary Jacob Lew at the Great Hall of the People, five days after he became head of state.

China's exports to the US consumer market have helped it achieve astounding growth over the past three decades, but it has resulted in huge imbalances in the relationship.

Beijing has accumulated $3.31 trillion in foreign exchange reserves, the world's biggest, and is the largest foreign holder of US Treasuries with $1.26 trillion-worth at the end of January.

The US posted a record $315.1 billion trade deficit with China last year and Washington politicians regularly accuse China of unfair business practices.

Lew stressed the importance of the two countries to the global economy, saying they had "a responsibility to maintain strong, stable and sustained growth in the world".

"We look forward to China contributing more and more to global demand," he added.

A US official described Lew as "candid and direct" during the 45 minutes of private talks, which covered the world economy, including the situation in Cyprus which is the subject of a controversial EU bailout.

Lew also brought up North Korea, the dollar-yuan exchange rate -- Washington considers the Chinese currency undervalued -- intellectual property and cybersecurity, the official said, without giving details.

A report last month from US security firm Mandiant said a unit of China's People's Liberation Army had stolen hundreds of terabytes of data from at least 141 companies, government agencies and other organisations, mostly based in the US.

Beijing has steadfastly denied the allegations and says it is itself a regular victim of cyberattacks.

At Tuesday's meeting, Xi said that in three decades of diplomatic ties between Beijing and Washington, "we have indeed traversed an extraordinary course and achieved bountiful fruits".

Both countries would derive mutual benefits if they "approach and handle this relationship from a strategic and long-term perspective", he added.

In a commentary the state-run Xinhua news agency welcomed Lew's visit but warned of Chinese vulnerability to US policies to shrink its government debt, a question which has polarised US politics.

"After a sweeping global financial crisis, the United States is facing one fiscal crisis after another," Xinhua said, noting that global investors want US lawmakers to reach a deal to avoid a debt default or government shutdown.

"The stakes are high," Xinhua added. "China is the largest overseas holder of US government debt, and the United States' second largest trade partner."

Xi became president on Thursday, ended a once-in-a-decade transfer of power in China that formally began with him taking the reins of the Communist Party in November.

US President Barack Obama telephoned Xi last week to congratulate him, but also mentioned the importance of addressing cybersecurity threats which he said represent "a shared challenge".

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