WASHINGTON U.S. Treasury Secretary Henry
Paulson said on Tuesday that China needs to introduce more
measures to boost domestic demand, while emphasizing the need
for continued reform of China's exchange rate policies.
Paulson also noted the continued fragility of the global
economy, and said the United States cannot afford to let its
auto industry fail.
Speaking to the World Affairs Council just before heading
for Beijing for two days of talks, Paulson said it was vital
that China continue to let its currency rise in value and open
"Continued reform of China's exchange rate policies is an
integral part of this broader reform process," Paulson said.
"China has appreciated the RMB over 20 percent against the
dollar since 2005 -- this is important and significant, but it
is important that the process continue."
China's currency, the yuan, is also known as the renminbi
Paulson will be participating in a fifth and, for him,
final round of a so-called "strategic economic dialogue" with
China that he initiated in 2006. It is unclear whether the
incoming administration of President-elect Barack Obama will
continue the effort.
Paulson said China must reduce its dependence on exports to
drive its economy, but praised Beijing for actions it has
already taken to help restore global economic growth.
"The Chinese throughout this process and throughout our
financial market challenges ... have been very responsible
partners and stakeholders and continue to stand by us and stand
by our debt," Paulson said.
With current economic problems far from over, it remains
vital the United States, China and others "take whatever
further actions are necessary to stabilize the financial
system, including using appropriate monetary, fiscal and
financial regulatory policies," he said.
In the case of the United States, that means keeping the
struggling U.S. automakers out of bankruptcy, he said.
"Given the state of our economic situation right now, given
how fragile it is, I certainly don't believe -- and no one in
this administration believes -- that bankruptcy of an auto
company would be a good thing," Paulson said.
But any government aid package has to be one "leading to a
viable industry," Paulson said, repeating the position the Bush
administration has taken in talks with Congress on a bailout
package for the auto sectors.
Paulson also said he believed, as a general policy, the
United States should not allow any organization to get "too
big, too important, too interconnected to fail. That's a bad
situation to be in. No doubt about it."
The meetings in Beijing on Thursday and Friday will include
talks on how the United States and China can work through
international forums to strengthen the global economy.
The Bush administration has been pushing for institutions
like the International Monetary Fund to be given a larger
supervisory role over global economic policies, including
Along with currency, Paulson said the large U.S. delegation
will also discuss consumer and product safety issues as well as
how to maintain open investment policies.
Paulson noted China announced a major fiscal stimulus
package in early November to spur domestic demand and urged it
to continue to do all it can to boost growth at home.
Asked about his plans after the Bush administration comes
to an end on Jan. 20, the former chairman of Goldman Sachs said
he would not be returning to a job on Wall Street.
"I've got a lot of other interests. You know, things like
conservation and others and I look forward to pursuing some of
those other interests," Paulson said.
In the meantime, Paulson said he was doing everything he
could "to make this transition as seamless as possible."
President-elect Obama is coming into office with a "strong
mandate," which will be a big asset in helping the new
administration cope with the financial crisis, he said.
(Reporting by Glenn Somerville, Doug Palmer and Lisa
Lambert; Editing by Leslie Adler)