II. Foundations for a strong financial system

We acknowledge the critical role that strong, vibrant financial markets operating under transparent and market-based rules play in supporting balanced and sustained growth globally.

We pledge continued close communication and coordination to promote financial stability and will work together to expedite the financial sector reform, to improve financial regulation and supervision, and to promote greater financial market transparency, so as to make our financial sectors more robust.

The United States will pursue comprehensive reform of financial regulation and supervision to create a more stable financial system and to help prevent and contain potential future crises. Regulation and supervision will be strengthened to ensure that all financial firms that pose a significant risk to the financial system will be well regulated, major financial markets will be strong enough to withstand system-wide stress and the failure of large institutions, and the government has the tools it needs to respond rapidly and effectively when problems arise. The United States pledges to continue to have strong oversight of the Government Sponsored Enterprises (GSEs). Through Congressional action, the United States remains committed to ensuring that the GSEs are able to meet their financial obligations.

The United States is committed to undertaking a process of exploring the future of the GSEs, including through seeking public input, and the United States government resolves to report to Congress and the public by S&ED II.

To deepen its financial system reform and promote more efficient financial intermediation in support of domestic demand, China will promote interest rate liberalization and consumer finance; accelerate the allocation of QFII quotas to $30 billion; continue to allow foreign-invested banks incorporated in China that meet relevant prudential requirements to enjoy the same rights as domestic banks with regard to underwriting bonds in the inter-bank market; gradually increase

the number of qualified joint-venture securities companies that can participate in A-share brokerage, proprietary trading and investment advisory services subject to the condition of meeting relevant laws and regulations; support qualified overseas companies to list on Chinese stock exchanges through issuing shares or depository receipts and continuously support qualified Chinese companies to be listed abroad, including in the United States.

We recognize the importance of ensuring sound regulation in our own countries and globally. The United States and China are undertaking IMF Financial System Assessment Programs (FSAPs) and will complete them in a timely manner. Both countries will continue to promote convergence towards a single set of high quality global accounting standards and will continue discussions on financial reporting matters. The United States and China welcome continued dialogue between the bilateral competent authorities on the oversight of accounting firms providing audit services for public companies in the two countries based on mutual respect for sovereignty and laws. The United States and China will conduct technical exchanges on the development of private pensions, and will share experiences and strengthen cooperation with regard to improvement of insurance regulation.