At a Washington conference Wednesday on economic relations between China and the United States, U.S. Treasury Secretary Henry Paulson said a market-determined, more flexible exchange rate of the yuan is very much in China's interest. VOA's Barry Wood reports Paulson also discussed some of the financial issues U.S. and Chinese negotiators will be discussing later this month.
Paulson told the conference that with China's trade surplus soaring there is a compelling case for China to ease the restrictions that prevent market forces from adjusting the yuan's value. The case for currency flexibility, he said, is greater now than it was two years ago when Beijing permitted a two to three percent rise of the yuan-dollar exchange rate.
In remarks at the Peterson Institute for International Economics, a private policy research group, Paulson acknowledged that the U.S. trade deficit with China is causing mounting frustration and rising protectionist pressure in Congress. But Paulson did not offer any hope that China was likely to accelerate its pace of currency reform, which U.S. manufacturers consider critical to trimming America's huge trade deficit with China.
He conceded that even if the yuan rises against the dollar, America's trade deficit with China will improve slowly.
"I'm not as concerned as some are by imports [from China]," he said. "I'm a big believer that imports help us contain inflation and they provide choices for Americans. [But] we clearly need a level playing field."
China and the United States have established a regular process in which the two countries discuss financial issues.
They held the first "Strategic Economic Dialogue" in December in Beijing and the second round of talks will be held in Washington on May 23-24. Paulson will head up the U.S. team and the Chinese side will be led by Vice Premier Wu Yi, who will meet with some of China's congressional critics.
The newly created bilateral strategic economic dialogue focuses on issues facing China and the United States, such as energy cooperation, tourism, capital markets and banking reform.
Investment banker Robert Zoellick, until recently the U.S. deputy secretary of state, told the Peterson Institute forum he hopes for greatly enhanced U.S.-China cooperation on many global issues, including energy security, North Korean and Iranian nuclear threats, and the humanitarian crisis in the Darfur region of Sudan. Progress on these issues, Zoellick said, must not be held back by trade and currency friction.
"There is a confidence [in China] that comes from incredible [economic] success. But there is also an openness to discuss these items," he said.
Zoellick added that it would be a tragedy of enormous proportions if economic tensions between China and the United States interfere with the possibility of strengthening the relationship between the two countries in other areas.