Paulson says China's economic boom is 'unsustainable' without reform

Paulson says China's economic boom is 'unsustainable' without reform

	Published : Tue, 23 Oct 2007 13:23 By : Agencies Print this Story

WASHINGTON (Thomson Financial) - China's economic boom will be 'unsustainable' and it will not be able to manage 'the blistering pace of its economic growth,' without major economic reforms, US Treasury Secretary Henry Paulson said today.

'China has proven to the world that it can grow fast, but can it grow differently and, ultimately, grow smarter?' Paulson asked in a speech to the George Bush China-US Relations Conference named after the first President Bush. The Treasury released his text to reporters.

The smarter growth he called for would mean 'growth away from heavy industry, high energy use, and dependence on exports -- towards greater reliance on domestic demand, greater production of services and greater provision of material well-being to China's population.

And, as always, the Treasury secretary called for a faster rise in the Chinese currency, the yuan. To date, the limited increases in the yuan's exchange rate against the dollar have not slowed the Chinese boom, as some in the country feared, Paulson said. A more flexible exchange rate would also 'make monetary policy much more effective in responding to inflation.'

There is resistance to reform in China and rising protectionism and economic nationalism in both countries he warned. Those views 'obscure each nations ability to assess the others' long-term intentions.

Most recently, the problem has been the safety of food and other US goods imported from China. Both countries need to respond based on science and 'not protectionism or retaliation,' Paulson said.

'The effectiveness with which China manages these safety issues will have long-term implications for US-China trade relations, the integration of China into the global trading system, and the sustainability of China's economic growth trajectory.'

dennis.moore@thomson.com

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