Stronger yuan would help China on inflation-Paulson

XIANGHE, China, Dec 13 (Reuters) - Chinese policy makers know that a stronger yuan would help them to dampen inflation, U.S. Treasury Secretary Henry Paulson said on Thursday.

"The Chinese recognise growing inflationary pressures in their economy and that a more flexible currency expands their ability to use monetary policy to stabilise their economy," Paulson said in remarks prepared for delivery at a news conference after a two-day "strategic economic dialogue" with Chinese officials near Beijing.

Chinese consumer prices rose 6.9 percent in the year to November, the fastest pace in a decade.

"I would also note we have made modest progress in the financial services area, expanding opportunities for global financial services companies to do business in China," Paulson said.

The Chinese government will soon publish rules permitting new foreign investments in domestic brokerage ventures, but the 33.33 percent cap on overseas ownership will probably remain in place for the near term, an official newspaper reported on Thursday.

China agreed to resume licensing foreign brokerage joint ventures at the previous instalment of the strategic economic dialogue, held in Washington in May.

"Opening China's financial markets to foreign competition strengthens the financial backbone of the Chinese economy, and is critical to China's goals of spreading the benefits of growth to all the Chinese people," Paulson said. (Reporting by Glenn Somerville; Editing by Alan Wheatley and Ken Wills)