US, Japan should press for China reforms-Treasury

WASHINGTON, March 27 (Reuters) - The United States and Japan should both encourage China to open its economy to foreign goods and move towards a market-based yuan exchange rate, a senior U.S. Treasury official said on Thursday.

In an interview on CNBC television, David McCormick, Treasury undersecretary for international affairs, said the United States and Japan share common trade objectives regarding China.

"Where there's particular opportunity is in the importance we both place on our relationship with China," McCormick said.

"The economic relationship between China and Japan is enormously important. We have a common set of objectives in terms of the opening of China's markets in terms of the movement of China to a market-based exchange rate and together we can work with the Chinese to make progress on that front," he added.

U.S. Treasury Secretary Henry Paulson is due to travel to Beijing next week to meet with China's newly appointed economic officials and deliver remarks on U.S.-China cooperation on energy and environmental issues.

His remarks will focus on a 10-year plan by the two countries to advance technological innovations, adopt clean energy technology and promote the sustainability of natural resources, the Treasury said in a statement.

On CNBC, McCormick, who is making a speech later on Thursday to the Japan Society in New York, said he hoped that if Japan launches a sovereign wealth fund, it would abide by International Monetary Fund guidelines for behavior and transparency.

"They have an enormous stockpile of foreign exchange reserves, but they have not up until this point established a sovereign wealth fund," McCormick told CNBC. "I understand through the papers that there's a lot of debate about that and the U.S. position is that it's a sovereign decision. So if they indeed go forward with a sovereign wealth fund, we hope it'll be in line with IMF best practices."

The IMF board last week agreed to proceed with plans to develop best practices guidelines for sovereign wealth funds to allay concerns about their increasing size and influence. It will meet with wealth funds in April and hopes to produce an initial draft by October.

The U.S. Treasury would like the IMF to adopt a set of wealth fund principles agreed with Singapore and Abu Dhabi, which contain an explicit pledge that they will invest solely for commercial purposes rather than to advance "the geoplitical goals of the controlling government."

It also wants the principles to spell out that countries receiving such investments should not erect protectionist barriers. (Reporting by David Lawder; Editing by Tom Hals)