I thought we were going to be better world neighbors? We have the gall to go to our main lender and demand that they make changes to a society that actually saves for the future while our society keeps spending like the bill will never come due? This is rich.
WASHINGTON -- U.S. Treasury Secretary Timothy Geithner heads to Beijing this weekend to urge Chinese leaders to fundamentally alter the export-oriented economy that has created years of trans-Pacific trade tensions.
In meetings with Chinese President Hu Jintao and Premier Wen Jiabao, Mr. Geithner is expected to reiterate U.S. support -- and gratitude -- for the giant stimulus package that China has implemented to combat the global recession.
But he is also planning to press Beijing to take drastic measures to turn China's economy into one that depends heavily on sales to domestic consumers and less on sales to the U.S. and other foreign markets, according to a senior Treasury Department official.
That means encouraging Beijing to offer more generous health-care, retirement, welfare, educational and other benefits in order to persuade the average Chinese citizen that spending now doesn't mean starving later.
"The efforts China could take would be efforts to strengthen the comfort that Chinese households have in spending, which largely involves reducing or addressing the reasons why they feel such a great need to save for precautionary purposes," said the senior Treasury official, who briefed reporters Thursday in advance of Mr. Geithner's departure on Saturday.
The message signals that Treasury is beginning to look beyond the current crisis toward preventing a return to ever-mounting trade deficits and the constant political tensions they generate between the U.S. and China.
The trip is Mr. Geithner's first to China as Treasury Secretary and an important step in resuming the dialogue pursued by his predecessor Henry Paulson.
The trip is intended to lay the groundwork for a broader Strategic and Economic Dialogue meeting in Washington this summer in which Mr. Geithner will lead the U.S. side of economic talks, while Secretary of State Hillary Clinton will head up the political and strategic discussions.
Mr. Geithner has been heartened by the fact that China's two-year, four trillion yuan package -- nearly $600 billion -- of government and corporate spending includes components to encourage a buying spree by Chinese consumers.
The government has compelled state-run banks to unleash a flood of credit, lending more in the first four months of this year than in all of 2008. And officials have announced a series of subsidies and other measures to encourage rural dwellers to splurge on such items as small-engine cars, home appliances and electronics.
"There is certainly discussion about the importance of shifting towards a more balanced, more domestic-demand source of growth for assuring Chinese growth in the future," the Treasury official said, noting that the Chinese have included that goal in their five-year plan.
That will also require, in the U.S. view, allowing China's currency to move more freely against the dollar. But Mr. Geithner is unlikely to hector Beijing about the yuan very much during this visit. The issue has long been a sensitive one, with U.S. manufacturers and their political allies accusing China of manipulating its currency to get an unfair edge in foreign trade.
Earlier this year during his confirmation process, Mr. Geithner labeled the country a currency manipulator, although the administration later backtracked and played down the comments.
The U.S., on a borrowing binge to restart the economy, needs China to continue to purchase dollar assets. Yet Chinese officials have, in recent months, expressed concern that big U.S. budget deficits and the threat of inflation might eat away at the value of their dollar holdings.
So far, however, Beijing hasn't pulled back from investments in U.S. government securities, something the Obama administration wants to avoid. "The last thing Geithner wants to do right now is rock the boat," said Frank Vargo, vice president for international economic affairs at the National Association of Manufacturers.
Mr. Geithner is scheduled to arrive in Beijing on Sunday for meetings Monday and Tuesday.—Andrew Browne in Beijing and Jason Dean in Singapore contributed to this article.