CHINA: U.S. Treasury Secretary Henry Paulson tells China the yuan must be more flexible during trade summit in Beijing

U.S. Treasury Secretary Henry Paulson said on Friday (December 15) he had told China in the clearest possible terms that the United States needs to see the yuan become more flexible. Paulson is in Beijing for two days of talks intended to ensure that China's ascent as a major trading power is mutually beneficial and does not end in trade protectionism and political recriminations. The Treasury Secretary is under pressure to deliver progress in the form of a faster rise in the yuan -- a litmus test for many of China's commitment to market reforms. China freed the yuan from a dollar peg in July 2005. Paulson said the United States and China shared a common interest on reforms but differed on how fast they should be implemented. "I think we both have common interests because we both want stability. We want China's economic development to be stable. If it weren't it wouldn't be good for either of our countries. And we have a point of view that there is more risk in going too slowly than there is in going too fast. And the Chinese see that differently," Paulson told reporters. Paulson said he hoped for more from China than simply sticking to its WTO obligations. "I see some resistance to moving ahead as fast as I'd like to see with reforms that go beyond WTO which I think would benefit the country (China). But there is resistance internally with entrenched competition and so on. And I see protectionist sentiment in the U.S., I see it in Europe, and so that is what I am focusing on," said Paulson. U.S. Trade Representative Susan Schwab said she could sense resistance to reform. "It is clear there are voices in China - just as there are voices in the United States - that would not like to see more market opening or more economic reforms, or less intervention in the market by the government. And so the proof is going to be in the action," said Schwab. Paulson was joined on a podium by six other cabinet officers who were part of the high-powered U.S. delegation. Although there were disagreements on the best way forward, some modest targets were reached. China agreed to let the New York Stock Exchange and Nasdaq open offices in Beijing, while Washington gave the green light for China to join the Inter-American Development Bank.

ITN Source | December 16, 2006

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