Locke says China need not fret over dollar assets

China should rest easy that its investments in the dollar remain safe, the newly arrived U.S. ambassador in Beijing, Gary Locke, said on Sunday, adding that the world's two biggest economies could find common ground despite economic and political strains.

In his previous job as U.S. commerce secretary, Locke often chided China over its trade policies, but in his first media appearance since taking up his new job in Beijing he gave a more benign message of potential cooperation.

"The United States and China have a profoundly important and complex diplomatic and economic relationship, one with challenges, to be sure, but which also holds great promise for expanded cooperation and collaboration," Locke told reporters.

Since Standard & Poor's cut its credit rating for long-term U.S. debt in early August, Chinese state media have accused Washington of reckless fiscal policies that have created uncertainty about Beijing's big holdings of dollar assets.

Analysts estimate Beijing has put about two-thirds of its $3.2 trillion foreign exchange reserves, the world's largest, in dollars and is the United States' biggest foreign creditor.

Asked about Chinese disquiet about the U.S. economy and creditworthiness, Locke said President Barack Obama and Congress has mapped out a "path ensuring fiscal integrity of the United States." He said U.S. treasury bonds were still finding buyers despite the downgrade.

"It's a clear indication that investment in the United States is safe, secure and that the economy, while having its challenges, is still strong," he said.

"We have this opportunity as two great nations to provide the leadership for the entire world," Locke, a former governor of Washington state whose ancestors came from China, told reporters outside his new residence.

Even before arriving in Beijing, Locke made a splash on the Chinese Internet, when photos spread online of him lined up at a coffee shop at Seattle airport without the security guards and secretaries that many Chinese people expect officials take everywhere.

Asked about the pictures, and whether he would take to China's Internet to talk directly to users, Locke just said: "We look forward to using all forms of communications, including blogging and the electronic media."

Locke has pledged to press China to open its market to more U.S. goods and services, move to a more flexible currency exchange rate and step up action against counterfeiting of American products.

In the first half of 2010, Sino-U.S. relations were shaken by a series of disputes over Internet censorship, Tibet and U.S. arms sales to Taiwan, the self-ruled island that Beijing deems an illegitimate breakaway.

Since then, both sides have sought to steady ties. But Chinese media have warned that a possible new sale of U.S. arms to Taiwan, including fighter jets, would anger Beijing.

Last week, a commentary in a popular Chinese tabloid, the Global Times, argued that China should use its "financial weapon to slap Washington" over arms sales to Taiwan.

The debt issue and Taiwan are also likely to feature when U.S. Vice President Joe Biden visits China for several days from Wednesday.

[Source: Reuters, Beijing, 14Aug11]

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