But much remains to be done to integrate China into the global economy, and the next step is for China to join the World Trade Organization, a step we strongly support. China has taken steps to open its markets but serious impediments to trade and investment remain. What has happened is that to some extent our trade deficit with China has increased because companies from other Asian economies are shifting their low wage production to China, and as a result we experienced a corresponding improvement in our trade balance with those other countries. Another factor contributing to our trade imbalance with China is its exchange rate policy and its accumulation of reserves, even though trade impacts may not be the purpose of this policy. While comfortable levels of reserves are essential for every economy, especially in the context of recent financial turbulence, the levels China has reached raise questions as to whether continued reserves growth represents an efficient use of China's savings, a matter I discussed with China's leadership when I was in Beijing.
China can earn higher returns by investing in real capital than by money market investments.
Such a move would not only bolster Chinese development, it would help increase Chinese imports, helping to moderate China's external imbalances. No nation can claim perfection on these matters, but throughout our history we've been a strong advocate of human rights throughout the globe. Respect for human rights is part of our identity as a people and we believe these rights are universal. This issue will continue to be an important part of our dialogue with countries around the world, including China, and President Clinton will certainly raise this issue with President Jiang this week. We need to increase that greatly on the government to government level, but we also need to build increased understanding by the Chinese and American people about each other's countries, and among the American people about the importance of a strong relationship with China.