U.S., China Make Great Progress in Currency Talks, Lew Says

The U.S. and China have made progress on their exchange-rate debate over the years while the Asian nation’s ability to control excess capacity will be central for expanding its economy, Treasury Secretary Jacob J. Lew said Sunday in Beijing.

Lew, speaking to students at Tsinghua University, said China’s government is moving in the right direction on its currency. He, however, added that the People’s Bank of China in August “was not clear” in its communication about the currency.

“China has committed to moving in an orderly way to a more market oriented exchange rate,” Lew said. “It’s important for China to stick to its reform agenda.”

The U.S. has urged China to implement measures to support domestic demand and increase household income, improve economic transparency and liberalize investment rules. Authorities have cut excess industrial capacity including for coal and steel, while the nation plans to seek ways to increase the yuan’s convertibility by changing currency policy and opening up the finance industry, according to the Communist Party’s next five-year plan.

Lew is scheduled to participate in the U.S.-China Strategic and Economic Dialogue Monday and Tuesday in Beijing that will be attended by China Vice Premier Wang Yang, State Councilor Yang Jiechi and U.S. Secretary of State John Kerry.

The U.S. won’t be critical if the yuan is allowed to fluctuate, Lew also said during a question and answer session.

“It’s actually been intervening to strengthen not to drive down the renminbi” he said. The issue remains important “because it matters deeply in terms of the perception of whether or not there’s a level playing field and whether there’s fair competition between our two great countries. But it’s now an issue where we can look back and say we’ve made great progress.”

Lew said China’s excess capacity has enormous effect on the global steel industry, and he said other nations are raising questions about China capacity surplus. Excess capacity corrodes an economy’s efficiency, he said.

“We need to make sure we continue in the future to see the policies follow along in a positive way.”

To contact Bloomberg News staff for this story: Steve Geimann in London at sgeimann@bloomberg.net. To contact the editors responsible for this story: Guy Collins at guycollins@bloomberg.net, James Kraus, Albertina Torsoli