Paulson tries to deflect congressional China criticism

Paulson tries to deflect congressional China criticism

	Published : Wed, 20 Jun 2007 18:31 By : Agencies Print this Story

WASHINGTON (Thomson Financial) - US Treasury Secretary Henry Paulson today tried to deflect congressional criticism that more needs to be done, aside from bilateral talks, to combat China's undervalued currency and limits on access to China's financial services market.

House Financial Services Committee Chairman Barney Frank led off today's hearing in that committee by complaining about China's seemingly one-way access to the US market. 'China has performed a great engineering feat, and made the Pacific Ocean one way,' he said.

Frank and other members peppered Paulson with demands for an explanation of why the US has not cited China formally as a currency manipulator, and requests that the US should limit China's access to the US financial services market until China opens its market. However, Paulson sought to assure members that these issues were being handled.

On currency, Paulson reiterated that Treasury cannot determine whether China is undervaluing its currency for the purpose of gaining a trade advantage. He also noted that China is slowly allowing the renminbi to appreciate, even though he repeated his call for faster movement on China's part.

Paulson also declined to say how much the renminbi is undervalued, even though Treasury last week acknoweldged it is undervalued. 'I don't know,' he said.

Paulson also said a formal citation as a currency manipulator would only lead to negotiations with China, which are already happening, and reiterated that an appreciation of the renminbi would not eradicate the US trade deficit with China.

On financial services, Paulson sidestepped the idea of closing the US market to China, but agreed with members that the US needs to open China's market further and said the US is making progress in this area. At last month's bilateral meeting of the Strategic Economic Dialogue, China agreed to come up with a plan later this year to open its securities market to foreign companies beyond the level of access it agreed to in the World Trade Organization.

On the domestic front, Paulson said he agreed with some members that the threat of excessive litigation in the US is a substantial risk to companies invested in the US. But when asked about the Sarbanes-Oxley legislation, which was put in place to toughen corporate governance standards, Paulson said he believes this is 'good legislation' that has had some implementation problems, and that these problems are being addressed.

Paulson said the global economy is in as good a shape as he's ever seen it, and touted the strong US economy as well. When asked why there appears to be little public confidence in the US economy, Paulson cited the widening income gap, the pace of economic change, and technological advancements as possible reasons.

Paulson also said entitlement reform and energy security are two major problems facing the US, and said he is hopeful the administration and Congress would get together at some point to reform entitlement programs.

pete.kasperowicz@thomson.com

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