The nominee for the U.S. Treasury’s top economic diplomacy job said on Tuesday he wants to limit China’s growing global lending influence by working with international financial institutions and development banks to give countries borrowing alternatives.
Jay Shambaugh is President Joe Biden’s choice for Treasury undersecretary for international affairs. If confirmed, the George Washington University professor and former Obama administration economic adviser would fill a crucial Treasury position that has been vacant since the Biden administration took office in January 2021.
Speaking to a Senate Finance Committee confirmation hearing, Shambaugh said there is competition between China’s state-driven economic model and the U.S. model driven by rule of law, transparency and markets.
He said in working with institutions including the World Bank and International Monetary Fund he would seek to present “a good alternate option to engaging with China for countries, whether it’s in loans or other sorts of engagements.”
Shambaugh said China should no longer be considered a developing country eligible for World Bank loans. He also said he wants to ensure that International Monetary Fund Special Drawing Rights monetary reserves channeled to poorer countries are not used to pay off debts owed to China for Belt and Road infrastructure projects.
Regarding the Biden administration’s deliberations over whether to cut some tariffs on Chinese goods imposed by the Trump administration, Shambaugh echoed Treasury Secretary Janet Yellen’s comments that some of those tariffs had “less of a strategic orientation to them.” He said these tariffs should be reassessed as the economy has changed since they were imposed.
On Treasury’s role in policing currency manipulation by major U.S. trading partners, Shambaugh said his job would extend well beyond producing currency manipulation reports every six months.
Regardless of whether Treasury labels countries currency manipulators in the reports, the department still must engage with those countries to ensure that they meet their G7, G20 and IMF commitments to avoid manipulating their currencies for trade advantage, he said.
Longtime Treasury assistant secretary Andy Baukol has been fulfilling the duties of the vacant undersecretary position, while David Lipton, a counselor to Yellen and a former senior IMF official, has been playing a key role in developing Treasury’s international economic policy.