The US government on Sunday called on China to continue along the path toward a more market-oriented exchange rate even as it underscored the need for Beijing to clearly communicate its policies to the financial markets.

US treasury secretary Jack Lew made the call during a meeting with China's Vice Premiere Wang Yang in Beijing following the G-20 finance ministers' summit in Shanghai, where current market turmoil and the global economic slowdown were key topics of discussion.

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"As the global economy faces many challenges, our open and frank communications are more important than ever, and we must continue to work together for the benefit of both our nations," Lew said.

"Continued Reforms"

Key global policymakers at the Shanghai talks were blunt in their appraisal of China's ability to manage its domestic markets.   China stocks saw a six percent decline on Thursday last week, their biggest one-day loss in a month, highlighting the volatility that has shaken the country's financial markets over the past nine months. 

Chinese policymakers subsequently spent much of their time at the summit parrying criticisms and reassuring trading partners that Beijing can manage market stability while driving structural reforms.

"We welcome China's efforts to transition to a more consumption-driven economy, including through fiscal policies that support household demand and actions that reduce excess industrial capacity," Lew said in his meeting with Wang.  "We also look forward to seeing continued reforms in the financial sector that also strengthen financial stability."

Prompt Communication

Like other economies, China is struggling to strike a balance between short-term stability and structural reforms that risk mass unemployment and social unrest.  Critics, however, have called attention to Beijing's poor communication with global financial markets.

"It is also critical that China continue to move toward a more market-determined exchange rate and transparent exchange rate in an orderly manner and clearly communicate its actions to the market," said Lew.

Chinese finance vice minister Zhu Guangyao said last week that China will seek to keep the exchange rate stable while maintaining its present "managed float" regime, which allows market forces to influence the way the yuan is priced against other currencies.

"We do recognize the risk the global economy faces," Zhu said in English during a conference organized by the Institute of International Finance at the sidelines of the G-20 talks. "We also understand how important it is to correctly communicate with the market."

TagsUS-China relations, yuan exchange rate, G-20 Summit