BEIJING AND WASHINGTON — When Treasury Secretary Timothy F. Geithner arrives Sunday in Beijing, he will have to begin assuring the Chinese that their vast holdings in federal bonds are safe and that the Obama administration is doing everything it can to preserve the value of the American dollar.
But Geithner, the former Peking University student who is now entrusted with laying the groundwork for arguably the world's most important economic relationship, will also use the three-day trip to pitch Beijing on long-term economic reforms that will reduce the trade imbalance between the two nations and wean the U.S. off easy Chinese loans.
In meetings with President Hu Jintao and Premier Wen Jiabao, Geithner will encourage the Chinese to rely less on exports and to develop a broad-based domestic consumer market, said a senior Treasury official who briefed reporters on the visit's goals.
"One of the objectives of the trip . . . is the importance of laying the foundations for balanced, sustained growth in the future," the official said. "For China this involves stronger domestic demand growth. It involves shifting the structure of the Chinese economy to [spur] domestic demand."
One reason for the approach: The trade deficit between the United States and China -- which reached $288 billion last year -- has long been a political flash point. Beijing has been accused of artificially devaluing its currency, the yuan, to make exports more affordable at the expense of American manufacturers.
Geithner alluded to the practice during his Senate confirmation hearing in January by saying President Obama "believes China is manipulating its currency."
The remark was later described as a mistake and the administration has since stayed away from highlighting the issue of currency manipulation, which has become a surefire way to raise tensions with America's largest creditor. China holds more than $1 trillion of U.S. Treasury bonds and other government securities.
Though Geithner got off to a rocky start in the eyes of the Chinese, it is unlikely to hinder progress, said Andy Rothman, an economist at brokerage and investment group CLSA Asia-Pacific Markets.
"He's going to be well-received in China," Rothman said. "It's unusual for Hu and Wen to meet a Cabinet officer. Obviously the relationship is that important."
