US Treasury chief Jack Lew to urge China to crack down harder on North Korea, move faster on economic reforms

US Treasury Secretary Jack Lew addresses the media at the Medical Centre Hospital in San Juan, Puerto Rico, on May 9, 2016.
US Treasury Secretary Jack Lew addresses the media at the Medical Centre Hospital in San Juan, Puerto Rico, on May 9, 2016.PHOTO: REUTERS

SEOUL (AFP) - United States Treasury Secretary Jack Lew will urge China to crack down harder on North Korea and move faster on domestic economic reforms when he visits Beijing next week, top US officials said on Friday (June 3).

Mr Lew will join Secretary of State John Kerry in the Chinese capital for the annual US-China Strategic and Economic Dialogue on June 6 and June 7, which will be shadowed by disagreements over regional tensions in the South China Sea.

Mr Lew, who was in Seoul on Friday for talks with South Korean officials, told reporters that the annual talks were a "crucial forum" for working through areas of bilateral friction.

On the economic front, the US side will press China to move forward with reforms to boost domestic demand, improve transparency, move towards a market-determined currency exchange rate and, above all, curb excess manufacturing capacity.

"It is an issue of central concern, when excess capacity is distorting markets as important as global commodities," he told reporters.

China has committed to addressing the overcapacity issue, especially in the metals sector like steel and aluminium, but is extremely wary of the social consequences of mass industrial layoffs.

"It's hard ... it means millions of workers being transitioned," a senior US Treasury official acknowledged.

"But if action isn't taken, excess capacity will continue to just erode China's future capacity for economic growth.

"That's not good for China and that's not good for the global economy," the official said.

Mr Lew is also expected to push Beijing to do more in implementing tough UN sanctions imposed on North Korea following its latest nuclear test in January.

The US spearheaded the drafting of the UN resolution that was adopted unanimously by Security Council members, including China - North Korea's main diplomatic protector and economic benefactor.

On Wednesday, the United States took steps to further lock North Korea out of the world financial system as it officially labelled the country a "global money laundering concern".

The action prevents both direct and indirect North Korean financial activities within the US banking system.

"The action we took is very tough... but it will take a lot of continued focused intention to make an impact," the senior Treasury official said.

"China has taken steps ... more than in the past. But we've also made clear there is a need for even greater pressure and additional action to be taken," the official said.