On Dec 11, Henry Paulson, the Treasury Secretary of US, and the Special Deputy to US President, accepted an interview from People's Daily Online.
Reporter: Mr. Paulson will make some comments on US-China economic and trade ties, and as is well known to everybody, strategic economic dialogue between two countries has become a hot topic in today's China. What are the most significant things about this dialogue and what do you expect most of this dialogue?
Paulson: The relationship between US and China is a very important one: a complex and important one. The economic relationship is very important to that relationship. When Presidents Bush and Hu put this dialogue in place- they have asked us to focus on the long-term issues, strategic issues, and also issues that are most sensitive at any point in time. Big objective- keep relationship on even keel in times of tension. As I see upcoming dialogue- I'm very pleased to be here, looking forward to dialogue - focus on integrity of trade, product safety and (food safety =top agenda item); talking about environmental issues - both countries care about climate change, environment. There are ways in which we can cooperate in developing clean technologies. We will always talk about RMB flexibility: appreciation has been accelerating over the last year.
Henry Paulson answers questions from online readers of Strong China Forum of People's Daily Online.Reporter: Mr. Paulson's answer may satisfy the readers' curiosity. One reader raised this question: The central government's economic work just closed. At a conference, Chinese policy makers set forth two “prevents”- prevent rapid economic growth from overheating; secondly prevent price hike from becoming evident inflation.
Paulson: I'm glad policy leaders are focused on containing inflation: it's the key to stable growth. Inflation is the enemy of economic expansion, and the cost falls very heavily on the people. I believe that leaders will find it easier to control inflation as they allow the RMB to appreciate more rapidly and reflect economic fundamentals because that can make their monetary policy more effective.
Reporter: There's a common concern from many readers from PD Online. Seemingly there's a rising global trend of trade protectionism. What do you think of this?
Paulson: I'm very concerned about the rising tide of trade protectionism and economic nationalism. It's perplexing because the lessons of the last 20-30 years are that the countries that have opened themselves up to free trade and investment and integration in the global economy have benefited and those who haven't have been left behind. Trade benefits all those who participate in it, but yet there's a rising tide of protectionism. This can be partially explained by the widening gap in income between those at top and those at the bottom. It can be partially explained because people in some nations (including the US) don't believe the benefits of trade are equally shared; but it's not a healthy thing, because trade in competition is good. An economic relationship and trade with China benefits both countries. I think one of our jobs in the dialogues: make the case as to why trade is good, why China's economic success is good for the US, and the US's economic success is good for China.
Reporter: Many online readers are also concerned about one question: the EU and US have imposed pressure on China several times to push the appreciation of the RMB. Is it possible that the EU and US are trying to shift their own economic problems onto China?
Paulson: (I'll tell you what I think): It is in China's best interest to accelerate the appreciation of the RMB. I think that will make your monetary policy more effective, will help you do a better job controlling inflation, and will help have stable long-term growth. From a global perspective: as the economy has evolved, the other major economic nations - big participants in the global economy - have currencies where the value is determined in the marketplace. China, as a developing country, is not ready to have a market-determined currency; but the currency is the medium of exchange for trade. So, it's an unnatural act to have China so integrated into the global economy in terms of trade and goods and services; while having a currency that doesn't reflect fundamental economics. Therefore, this creates natural pressures. Today's world is going to have to sort this out.
Reporter: PD readers, before you came, they know of you. They are broad-minded readers. Now the dollar, especially the exchange rate for US dollars is on the steep decline recently. What will the US government do to tackle this?
Paulson: You've heard me say, that a strong dollar is in our nation's interest. And our economy goes through ups and downs. But I believe the economy will continue to grow, and its fundamental economic strength reflected in currency markets. Speaking more broadly of economic policies and conditions-US favors pro-growth polices: policies that create jobs, increase productivity and employment. We focus on those policies: keeping tax rates low. We also recognize need for a solution to entitlement spending programs: social security and medicare for healthcare. Currently we don't have much of a deficit. It's about 1.2 percent of the GDP. But looking ahead, we'll have an issue unless we come up with a way to reform social security and medicare. This is something both President Bush and I are focused on.
Reporter: Statistics show that the China-US bilateral trade volume has reached 248.19 billion US dollars. And in recent years, China's trade surplus has been on the decline. What do you think of this?
Paulson: You're right. US exports to China have been growing faster than imports from china. But imports are so much larger than exports that our trade deficit w china is still increasing; increasing at a slower rate. I tend to emphasize exports: I don't think imports from China are hurting the US economy. I think they're good: they increase choices for US consumers, help us contain inflation. I focus on increasing exports to China: see China's economy grow and develop in a way in which it relies more on consumption going forward and grows in a balanced way. And we focus on the desirability of opening up China's markets to greater competition which will benefit all Chinese people.
Henry Paulson leaves autograph for Strong China Forum. Reporter: Many Americans have invested in China in recent years and set up their business. Why has not one ever been listed in areas like Shanghai or Shenzhen? Should we encourage American enterprises to be listed in the Chinese mainland?
Paulson: As China's markets develop further and become broader and more competitive and efficient, and as markets become globally integrated, I think you will see more issuance. I think in the short –term, what would be very good: the Chinese government to allow more foreign companies with investment in China to do RMB financing/equity/debt in Chinese markets. I think you will see more of this; it's a good thing. I look forward to seeing more of this.
Reporter: A more personal question: As many Chinese people know, you were very successful on Wall Street. Now you're serving the government. From Wall Street to the White House, you must have faced different challenges, playing totally different roles. What are these challenges and what major changes have you made to fit in your current position as Secretary of the Treasury?
Paulson: I'm very pleased that I've made this decision, because it is whenever I come to China ( I've been here many times before) I feel a great sense of pride coming here representing my country. You're right there are changes. There are also certain things that are the same. In the private sector and government: key is to work with other people, being able to persuade other people, and work as a team. That's very similar. I now have a boss, the President of the US. And it wasn't as big a change, because as an investment banker I often provided advice to clients. I gave the best advice I could and I tried to persuade them. Sometimes they took my advice and sometimes they didn't. I've very much enjoyed working with president and other Cabinet secretaries. I have the opportunity to work with Congress: it's a challenge. I have many clients in Congress. The job in some ways it's the same, in some ways different. Change is good. I'm glad I've made the change.
By People's Daily Online
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