China must show ‘will’ to reform economy—US

Women work at a garment factory in Huaibei in central China’s Anhui province Tuesday, Jan. 20, 2015. China’s economic growth slowed to 7.4 percent last year, the weakest expansion in more than two decades. AP Photo

Lima, Peru—China needs to show the world it is going to follow through on reforming its economy to a more market and consumption-based model, US Treasury Secretary Jack Lew said Thursday.

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“China has undertaken a reform program… that would address many of the important challenges that China is facing. The question now is, do they have the will to stick with that and to demonstrate through their action that they’re sticking with that,” Lew told journalists on the sidelines of the IMF and World Bank meetings in Lima, Peru.

The world’s second-largest economy has begun transitioning from an export-based economic model toward a lower-growth, more consumption-driven model.

China has also announced reforms in how it manages the yuan, allowing its currency to float more freely after years of US criticisms that it is artificially undervalued to dope exports.

Lew also welcomed a new plan due to be adopted at the Lima meeting that aims to crack down on multinational corporations’ use of tax havens to avoid paying taxes in the countries where they actually do business.

“We can’t get into a beggar-thy-neighbor kind of economic policy making,” he said.

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He also urged his own country to avoid jeopardizing its budding economic recovery with gridlock in Congress, which must raise the US borrowing limit again by November 5 or risk a credit default.

Congress, which is controlled by President Barack Obama’s Republican opponents, must also craft a budget agreement before December 11 or face a government shutdown.

“We have stable growth right now and we’d certainly love stronger growth… but the question is will we muster the political will to avoid self-inflicting wounds that come from political stalemates,” Lew said.