China is too far down the road toward a market economy to turn back from reforms now, even if US financial market turmoil is causing it some qualms, US Treasury Secretary Henry Paulson said on Thursday.
Near the end of a two-day visit, Paulson told reporters the biggest threat to continued reforms came from firms in China that want to be protected against competition at a time when the United States is pushing for more open markets.
"I think it's pretty hard to say, if you're China, that we want full integration in trade and we want everybody else to open their markets but we're not going to open ours because we're concerned about turmoil in our markets," Paulson said.
"That just isn't going to wash," he added. Paulson said he was confident China would keep moving toward adopting reforms needed to have a market economy. "Reform never moves in a straight line. I think the biggest threat for reform in China is a strong domestic industry that doesn't want competition," he added.
Paulson said Chinese officials indicated they were closely monitoring US market conditions and signalled that he had pulled no punches in describing to them the difficulty the US economy faced. "There is no doubt we're having a tough quarter, that the economy has turned down sharply," Paulson said, but he refused to be drawn into discussion of remarks by Federal Reserve Chairman Ben Bernanke on Wednesday that recession was a possibility.
"I'm just not going to get into a technical definition and I'm not going to get into that debate," Paulson said. "To me, the relevant thing is the economy has slowed way down and we're focused on it."
Paulson again praised China for letting its yuan currency rise more quickly, a long-standing demand of the Bush administration. The Chinese currency, also known as the renminbi (RMB), gained 4 percent against the dollar in the first quarter and has now risen 18 percent since July 2005, when it was depegged from the dollar.
"Although the process of adjustment is not complete, the accelerated pace of appreciation is significant and welcome, and should continue," Paulson said in a speech to the Chinese Academy of Sciences. A stronger exchange rate would help China to tackle inflation, now at a near-12-year high of 8.7 percent, he said.
Although China would shed some jobs as its economy adapted to a stronger currency, there was no sign that overall growth had been hurt by the rising exchange rate, Paulson told reporters.
By contrast, maintaining a misaligned, undervalued currency was fraught with risk. "China's economy is so large, complex and integrated that it is dangerous if it does not have an RMB that reflects fundamentals," Paulson said.
In an interview with China Daily.com, Paulson said he saw little risk that China might sell off its holdings of US Treasury securities because a falling dollar made them less attractive. China is second only to Japan in the size of its Treasury holdings, at around $492 billion.
Paulson cited the highly liquid market for Treasuries and said that, when their risk-related return was weighed against other investments, "I'm confident that there will be plenty of people buying US Treasury bonds for many years."
In his address to the Academy of Sciences, Paulson strongly urged Beijing to drop barriers against foreign-made anti-pollution equipment as a way to help clean up its dirty air and water.
"A high priority should be given to eliminating tariffs and non-tariff barriers on products, goods and services that can improve the health and welfare of the Chinese people," he said. "It doesn't seem economically sensible and morally right" to make it costlier than necessary to import necessary technology from abroad, he said, noting that with an economy one sixth the size of America's, China was about to become the number one source of greenhouse gas emissions.
Comments
Comments are closed.