China faces risk of US protectionism if slow to open markets

China faces risk of US protectionism if slow to open markets - Paulson

	Published : Wed, 06 Jun 2007 03:41 By : Agencies Print this Story

WASHINGTON (XFN-ASIA) - China should step up the opening of its markets and the reform of its currency to help avert a 'protectionist tide' in the US, US Treasury Secretary Henry Paulson said.

Paulson, in a Washington speech, reiterated that Beijing is moving too slowly in its currency and economic reforms at a time when the US public and lawmakers are increasingly impatient.

'We who believe in open economies are swimming against a strong protectionist tide these days,' Paulson said in his remarks prepared for delivery at the Heritage Foundation, a conservative think tank.

'As I explained to the Chinese, a large section of the American public doesn't believe that the benefits of trade are being shared equally between or within our two countries, and Congress reflects that view.'

Some critics of China accuse Beijing of keeping its yuan currency grossly undervalued to make its exports to the US cheaper -- a key factor cited for the US trade deficit with China that hit 232.5

bln usd last year.

Paulson said China needs to accelerate the pace of reform.

'The Chinese have taken some steps, and they can do more,' he said.

'While currency reform is not going to eliminate our trade deficit, a market-determined exchange rate that reflects the underlying fundamentals of the Chinese economy is one component of the actions needed to address imbalances.'

Paulson said competition and market principles would 'spread the benefits of China's robust growth to all of China's people' and that Beijing should take more steps to reform an economy that is still partly state-controlled.

'Americans are impatient to see real change,' he said.

'Today, China is part-way between an administered economy and a market-based one. I think that the greater risk for China is in moving too slowly, not in moving too quickly, and I have tried to impress that upon the Chinese at every opportunity.'

Paulson's comments came two weeks after the 'strategic economic dialogue' talks in Washington, the second in a series of high-level discussions on economic ties between the US and Chinese governments.

Paulson said the discussions produced 'tangible results that have laid the groundwork for greater progress' including a new civil aviation agreement and accords for cooperation on energy, the environment, and financial services.

But Chinese Vice Premier Wu Yi said elasticity of the yuan rate will be determined in an 'orderly' manner,' despite threats by US lawmakers of punitive tariffs on Beijing.

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China faces risk of US protectionism if slow to open markets - Paulson