Geithner says U.S. committed to pull deficits down

By Glenn Somerville

BEIJING (Reuters ) - U.S. Treasury Secretary Timothy Geithner, aiming to persuade China that its U.S. investments were safe, pledged that the Obama administration was firmly committed to ratcheting down huge deficits as quickly as it can once economic recovery is assured.

"No one is going to be more concerned about future deficits than we are," he told reporters while en route to Beijing for two days of meetings on Monday and Tuesday with top Chinese officials including President Hu Jintao and Premier Wen Jiabao.

During the past week, uneasiness in financial markets over soaring U.S. budget deficits has driven interest rates up and added to worry about whether there will be buyers for the flood of U.S. debt securities that are being auctioned to pay for recovery efforts.

China is the largest single purchaser of U.S. Treasury debt and already has shifted investment of some of its reserves to shorter-term maturities, a sign that it may fear the U.S. will be forced to push interest rates up to control inflation when recovery begins.

Higher interest rates could erode the value of China's U.S. dollar-denominated debt and Wen said earlier this year that he was concerned about the security of its debt. "I do indeed have some worries," he said in March.

A transcript that the Treasury issued on Saturday from an interview Geithner held earlier in the week with Chinese journalists showed the U.S. Treasury chief was prepared to repeat his backing for a strong dollar while on his visit.

"I will make it clear that we are committed to a strong dollar, that we are committed to bringing our fiscal deficits down over the medium term," Geithner said.

The Obama administration, and the former Bush administration before it, have collectively put hundreds of billions of dollars into recovery efforts from propping up the U.S. banking system to trying to restructure the auto industry, borrowing the money to do so by selling Treasury securities.