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US and China to resume talks on trade treaty

US official says investment treaty would "level the playing field" for US businesses seeking to enter Chinese market.

Last Modified: 12 Jul 2013 06:18
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Officials from the US and China are meeting in Washington for talks [AFP]

The United States and China have agreed to resume negotiations on an investment treaty, officials of both countries said. 

The agreement to resume negotiations came on Thursday during annual Strategic and Economic Dialogue talks in Washington, which have often produced few agreements of substance. 

US Treasury Secretary, Jack Lew hailed the treaty commitment as a sign of "positive change" in Beijing. 

"The high standard bilateral investment treaty with US will include all stages of investment. It’s a significant breakthrough and the first time China has agreed to do so with another country," Lew said at the conclusion of talks. 

He said the step would "level the playing field" for US businesses seeking to enter the billion-plus market.

China and the US began negotiations on a pact to govern bilateral investment in 2008 under then US President George W Bush, but discussions were put on hold after President Barack Obama took office the following year.

Previously, Beijing had agreed to talks only if certain Chinese industries, especially in its service sector, were exempt. 

"But it agreed to drop the conditions in the current talks," a US Treasury official said. 

Explaining China's motives for reopening the investment talks, Chinese Vice Finance Minister Zhu Guangyao said China had about $20bn of direct investment in the US and $1.2 trillion in US treasury bills. 

"With such an extensive investment relationship, it is necessary for the two sides to have an institutional environment for the protection of these investments," he told reporters. 

US investors face ownership limits in about 90 Chinese sectors, while Chinese investors often fear a political backlash in US Congress or rejection on national security grounds. 

Snowden discussed

Talks between both nations, however, struck a sour note over China's handling of former spy agency contractor Edward Snowden, who hid out in Hong Kong last month as he revealed a secret US surveillance programme before fleeing to Russia. 

Expressing displeasure, the US officials said that Chinese authorities allowed Snowden to leave for Moscow rather than send him back to face US justice. 

“We were disappointed with how the authorities in Beijing and Hong Kong handled the Snowden case, which undermined our effort to build the trust needed to manage difficult issues,” US Deputy Secretary of State William Burns said. 

But Chinese State Councillor Yang Jiechi swiftly brushed off Burns' criticism of Hong Kong, saying "The Hong Kong government handled the Snowden case in accordance with law, and its approach is beyond reproach".

Disputes over cyber security also topped the agenda going into this year's talks, previously launched in 2008 to manage a relationship that was growing more complex and tense with China's emergence as a major economic and military power. 

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