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Paulson to press Chinese leaders for economic reform

New US Treasury Secretary Henry Paulson, armed with a Rolodex full of contacts in China's communist elite, heads to Beijing this week to press for dramatic economic reform.

The multi-millionaire former boss of Goldman Sachs has warned US critics of China's trade policies not to expect a "quick fix" from his first visit to the country since he succeeded John Snow in July.

But many US lawmakers are eager to punish China over a variety of disputes, including its currency regime and a tidal wave of fake Chinese goods, ahead of congressional elections in November.

Paulson was to leave for China tomorrow after attending annual meetings of the IMF and the latest gathering in Singapore of finance ministers from nations in the powerful G7.

The G7 on Saturday renewed appeals for countries with large trade surpluses, "especially China", to relax their currencies and so help unwind yawning global imbalances.

"China needs greater currency flexibility and stronger domestic consumption as well as financial sector reform," Paulson told a news conference.

During his four-day stay in China, Paulson is expected to hold talks with top leaders including President Hu Jintao (胡錦濤), meet local business leaders and face University of Beijing students for a US-style "town hall" debate.

If any US official can persuade Chinese powerbrokers of the need for reform, it is Paulson, his aides believe.

He has visited the country some 70 times since 1990, when he was at the Wall Street titan Goldman Sachs, and is said to have built up an unrivalled network of ties with China's leaders.

Unlike Snow, Paulson also has the ear of US President George W. Bush, who has given him free rein to remake Treasury policy in relation to China and other areas.

"The Chinese are more likely to take seriously any tough messages that Paulson has to deliver," said Richard Bush, the director of Northeast Asian policy studies at the Brookings Institution in Washington.

"They are likely to listen carefully to any advice that he has on what they have to do because they have a store of confidence in his good will and sincerity," he said.

While US lawmakers make much of China's exchange rate, Paulson believes that a much bigger debate is necessary about the need to move the country's economy into a new era after the past two decades of breakneck growth.

That means China must transform its financial markets and release the shackles constraining domestic growth, while also elevating the country to the top tables of global economic decision-making.

"The United States has a huge stake in a prosperous, stable China -- a China able and willing to play its part as a global economic leader," Paulson said in a wide-ranging speech on Wednesday.

He warned that "we must not allow ourselves to be captured by harmful political rhetoric or those who engage in demagoguery," arguing forcefully for China to be viewed as a partner, not an enemy.
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