Geithner assures China that U.S. can handle its deficit

In his Economic Track Opening Session Statement in Beijing, Treasury Secretary Timothy Geithner on Monday assured the Chinese that the escalating deficit confronting the U.S. would lessen as the economic recovery takes hold.

"We will bring down our fiscal deficits to sustainable levels," he said. "The president has laid out a detailed, comprehensive plan to cut our budget deficit as a share of GDP by more than half over the next five years."

Rising deficits and increases in the debt have concerned many on Capitol Hill about Chinese investors becoming squeamish on U.S. investments. Geithner's assurance that the U.S. can handle its deficit comes as European leaders wrestle for control of their debt crisis, which is not expected to affect the global economy.

The Treasury secretary also pointed to the new healthcare law and Obama's debt panel as ways that will help reduce the deficit.

"The healthcare reforms adopted earlier this year will produce substantial reductions in healthcare costs," he said. "We have established a bipartisan Presidential Commission to recommend by the end of this year additional measures to achieve further reductions in our long-term deficits."

Geithner also used the speech to congratulate China on recognizing that a reform of its exchange rate would help global economic reform. He did so without mentioning the word "currency."

"Allowing the exchange rate to reflect market forces is important not just to give China the flexibility necessary to sustain economic growth with low inflation, but also to reinforce incentives for China's private sector to shift resources to more productive higher value-added activities that will be important to future growth," he said. "We want to encourage you to go further and take additional steps to make sure that companies that export to China, that operate in China and that compete with Chinese companies around the world are competing on a level playing field."