In China, Treasury's Lew Discusses Cybersecurity, Yuan

Steve Inskeep talks to Richard McGregor of the Financial Times about Treasury Secretary Jack Lew's trip to China. He bought a long list of economic agenda items to his meetings with top officials, ranging from cyberwarfare to China's currency controls.

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STEVE INSKEEP, HOST:

As President Obama travels in the Middle East, his treasury, Jack Lew, just finished a visit to China. He was talking economic issues and other aspects of one of the world's most vital relationships - maybe the most vital relationship.

To talk more about that, we spoke with Richard McGregor. He's Washington bureau chief for The Financial Times and reported from China for many years.

Secretary Lew traveled to China after a period of time in which one news story after another reinforces the U.S. mistrust of China - stories about Internet theft, of secrets and information, stories about what the U.S. calls currency manipulation. China would use a different word for it. How much has that been discussed?

RICHARD MCGREGOR: Well, I think the relationship is just saddled with mistrust, and I think the alleged cyber attacks, sponsored by the Chinese State, are a perfect example of that. But this is not just, you know, cyber attacks on the Pentagon or a U.S. government entities. What the U.S. says it's really concerned about are cyber attacks on U.S. - in other words, stealing commercially sensitive information and then giving it back to Chinese companies to compete against the U.S. And I think that was the big issue that Mr. Lew raised in all of his meetings.

INSKEEP: And is this something that the Chinese care to listen to?

MCGREGOR: I don't think so. I mean they would say, on one level, everybody does it - and that's true. But the distinguishing feature - according to the U.S. - is the attacks on commercial interests, which the U.S. says it does not do.

INSKEEP: The U.S. says it does not do that.

MCGREGOR: No. The U.S. says it doesn't use state interests to steal commercial secrets from foreign companies and then feed it back into that U.S. economy to its competitive advantage. But that's the accusation against China.

INSKEEP: So the United States is seriously concerned about cyber attacks. The United States has also expressed concern in the past - I don't know how many treasury secretaries have done it - over the value of Chinese currency and whether that is giving China unfair trade advantage.

MCGREGOR: Well, Mr. Lew, I think, raised that in all of his meetings but, you know, let's be frank about this, this is not as important issue as it once was and I would think it never should have been the front-burner issue. The idea that you would simply change the value of a currency and the trade surplus would disappear is not true and was never true. But on top of that, the Chinese currency has appreciated by about 30 percent over the last eight years, against the dollar.

INSKEEP: Let's just remind people the concern was that the Chinese currency was too cheap, which made Chinese products incredibly cheap in the U.S. and made U.S. products more expensive in China. That was the concern.

MCGREGOR: Yes, it was a certainly reasonable complaint, but it's changed. And I think this has never been as big an issue for the administrations as it has been for Congress.

INSKEEP: What do you mean?

MCGREGOR: Well, I think the administration has a much broader set of issues to deal with, with China, you know, North Korea, Iran, anywhere you look in the world where the U.S. has strategic interests, then it needs Chinese support at the United Nations. They would not want hobble the entire relationship just on the value of the currency.

INSKEEP: Are these two countries, then, on some level, essentially, have agreed on the same set of rules and understand each other?

MCGREGOR: No, they haven't, and I think that's the entire problem. It's the problem of a rising power like China coming up against a very settled superpower like the U.S. In the long term, the two nations are on a collision course because they have not agreed on rules of the road on all manner of issues. On cyber, for one; on how you manage both naval and commercial shipping in the South China Sea. There's all sorts of things that China is rubbing up against the U.S. They have a fantastic level of dialogue, but it's all about issues about a year ahead. They're managing their relationship. You know, they don't have a long-term statistic partnership at all.

INSKEEP: Richard McGregor of The Financial Times, thanks for coming by.

MCGREGOR: Thank you.

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