S&ED Promotes Stable and Cooperative Sino-U.S. Ties

Cooperation and Mutual Trust Vital to China-U.S. Ties

Since the founding of the S&ED mechanism, the two sides have made headway in such fields as economy, trade, finance, climate change, and emission reduction, guided by the principles of frank exchanges, pragmatic cooperation and mutual benefit. At the fifth S&ED, all present decided to formally initiate negotiations on a bilateral investment treaty (BIT). This constituted the most impressive outcome of this particular round of S&ED. The negotiation is China’s first on a BIT. If agreed upon, bilateral relations in the sphere of economy and finance will undoubtedly enter a new stage. The sixth S&ED will see formulation of an agenda on climate change and emission reduction. The two countries reached a consensus in 2012 on establishing a climate change working group within the S&ED framework. The China-U.S. Joint Statement on Climate Change was published on April 13, 2013. In July of the same year, the climate change working group submitted a report to special representatives of the two countries’ state heads. It raised five suggestions on controlling sources of primary greenhouse gas emission and of air pollution. On February 15, 2014, the two countries released another joint statement on climate change. It displayed the positive results of China-U.S. cooperation on climate change and emission reduction. The document also demonstrated both countries’ firm cooperative stance on climate change ahead of the new universal agreement on climate change to be reached in 2015.

According to the recent China-U.S. joint statement on climate change, “Both sides reaffirm their commitment to contribute significantly to successful 2015 global efforts to meet this challenge.” The two countries will also place emphasis on sharing information and talks; this is critically important to guiding the standard protocol on global climate change that the UN will announce in 2015. The Obama administration has committed the U.S. to a 17 percent emission cut by 2020 from a 2005 baseline. In 2009, the Chinese government also announced its emission reduction goal, whereby China’s 2020 carbon dioxide discharge per GDP unit will decline to an estimated 40-45 percent of the 2005 level. China-U.S. cooperation on climate change and emission reduction has displayed to the world a grand prospect for bilateral cooperation, and also propelled global emission reduction progress.

The achievements of the two countries in cooperatively dealing with global climate change demonstrate that the S&ED is an indispensable mechanism that enables the two sides to resolve disputes and deepen cooperation. To reduce greenhouse gas emissions and other air pollutants, China and the U.S. set up within the S&ED mechanism a working group on climate change and emission reduction. Shortly after they initiated an action plan for cooperation in five fields, including heavy-duty and other motor vehicles; smart grids; carbon capture, utilization, and storage; collecting and managing greenhouse gas data; and energy efficiency in buildings and industry.

As the world’s two largest greenhouse gas emitters, cooperation between China and the U.S. on emission reduction and combating climate change will enhance universal confidence in this regard. It will also constitute a major force in UN-led global cooperation on tackling climate change. On February 15, 2014, U.S. Secretary of State John Kerry, accompanied by U.S. Special Envoy for Climate Change Todd Stern, met with China’s chief negotiator on international climate change talks and vice chairman of the National Development and Reform Commission Xie Zhenhua. S&ED has without doubt become the most important vehicle for the two countries’ cooperation on combating climate change and emission reduction.

The growing importance in recent years of cross-border accounting/auditing and its role in bilateral business and financial cooperation is expected to be a main topic at the sixth S&ED. James R. Doty, chairman of the Public Company Accounting Oversight Board (PCAOB), expressed expectations that a bilateral agreement on cross-border accounting and auditing cooperation between supervisory agencies of both sides would be reached at the 2014 S&ED. The cross-border audit has been a priority at past S&ED rounds. Prior to the fifth S&ED, PCAOB signed in July, 2013 a memorandum of understanding with China on cross-border investigation. This was in a bid to carry out, together with China’s auditing authorities, cross-border auditing of accounting firms registered with the PCAOB and in China. Cross-border auditing is an important move towards guaranteeing a sound auditing and accounting environment for bilateral investment. It also ensures an objective, accurate and impartial consultancy on China’s companies listed in the U.S. In January, 2014, the U.S. Securities and Exchange Commission (SEC) declared its sanction of China branches of the four world famous accounting firms – KPMG, Deloitte Touche Tohmatsu, Ernst & Young Consulting and PWC – suspending for six months their accounting businesses in the U.S. With closer bilateral exchanges in the fields of economy and finance, the two countries need to intensify cooperation in law and supervision and in fighting cross-border business fraud and crime. The cross-border accounting/auditing cooperation, therefore, will play a central role in the development of bilateral relations.