Hacking indictments won’t hinder China talks, Treasury says

A nasty recent dispute with China over cybersnooping will not undermine talks between Beijing and Washington to improve economic cooperation and coordination, U.S. Treasury Secretary Jacob Lew said Tuesday.

“It’s very important for the United States and China to maintain the open discussion that we have,” Mr. Lew told a forum sponsored by the U.S.-China Business Council. “Obviously, we’re not shy about raising our differences, and they’re not shy about raising their differences.”

Cybersecurity, market access and trade reform are likely to be lead topics when Mr. Lew and Secretary of State John F. Kerry meet with their Chinese counterparts July 9 and 10 in Beijing in the latest round of talks under the bilateral Strategic and Economic Dialogue.

The meetings come just weeks after the Obama administration indicted five Chinese military officials for allegedly trying to steal American trade secrets, provoking an angry response from China.

“You can count on my making a point,” Mr. Lew said.

With American investments totaling more than $50 billion, the upcoming talks in Beijing will focus on the need for open markets and new rules on cybersecurity. With the 35th anniversary of diplomatic relations between the U.S. and China, Mr. Lew said a measured approach to progress between the two economic giants is to be expected.

“One doesn’t go from no access to total access, and improved access is an enormous value to American businesses,” he said. “So I think we have to take a nuanced view of what progress means, and we start to see value in making progress in important increments each time we get together.”

Mr. Lew said it’s a “mixed report” since last year’s talks on issues such as market access and trade zones. A bilateral investment treaty which attempts to open the Chinese markets for American companies is still being negotiated. The new Shanghai Free Trade Zone, established last year, is still getting established.

Mr. Lew said the investment treaty will not be completed at this month’s talks. Erin Ennis, U.S.-China Business Council vice president, said the investment treaty talks experienced a turning point last year when the two sides began using the same negotiation language with the “U.S. approach.”

“Up until that point, the U.S. and China had been talking about these issues, but it was really almost talking past each other,” she said.

Cybersecurity continues to raise red flags to American investors in China. Despite some progress, Mr. Lew said Chinese officials have failed to make these anti-hacking initiatives “rules of the road.”

“We’ve made that clear in a general way. We’ve made it clear in a rather specific way,” he said. “I don’t think there’s any question whether it’s a source of some difference between us.”

When asked why some Chinese companies are being denied applications to invest in the U.S., Mr. Lew said some pose a national security risk. He added they are a small group of the increasing Chinese companies investing in the U.S.

For many American investors, the pace of progress in China has been glacial. Mr. Lew said he detected a different sense of time between Americans and the Chinese, especially when it comes to economic progress.

“They have legitimate concerns about managing change in a way that doesn’t cause unnecessary social and political upheaval,” he said. “But, one can’t avoid the change without looking 5, 10 years ahead to a very unattractive economic picture.”

Despite the continuing hurdles, China’s economy remains a potent draw for a growing number of U.S. firms, Ms. Ennis said.

“We’re not seeing companies pull out wholeheartedly from the market, so it’s not something companies have thrown up their hands and said we’re never going to be able to make this work,” she said. “The vast majority of companies are doing business there, and they are making a profit in that market.”