China moving too slowly in its currency, economic reforms: Paulson

WASHINGTON, June 6 (AFP): China should step up market-opening and currency reforms to help avert a "protectionist tide" in the United States, US Treasury Secretary Henry Paulson said yesterday. Paulson, in a Washington speech, reiterated that Beijing is moving too slowly in its currency and economic reforms at a time when the US public and lawmakers are increasingly impatient. "We who believe in open economies are swimming against a strong protectionist tide these days," Paulson said in his remarks prepared for delivery at the Heritage Foundation, a conservative think tank. "As I explained to the Chinese, a large section of the American public doesn't believe that the benefits of trade are being shared equally between or within our two countries, and Congress reflects that view." Some critics of China accuse Beijing of keeping its yuan currency grossly undervalued to make its exports to the United States cheaper-a key factor cited for the snowballing US trade deficit with the Asian giant that hit 232.5 billion dollars last year. Paulson argued that China needs to accelerate the pace of reform. "The Chinese have taken some steps, and they can do more," he said. "While currency reform is not going to eliminate our trade deficit, a market-determined exchange rate that reflects the underlying fundamentals of the Chinese economy is one component of the actions needed to address imbalances." Paulson said competition and market principles would "spread the benefits of China's robust growth to all of China's people" and that Beijing should take more steps to reform an economy that is still partly state-controlled. "Americans are impatient to see real change," he said. "Today, China is part-way between an administered economy and a market-based one. I think that the greater risk for China is in moving too slowly, not in moving too quickly, and I have tried to impress that upon the Chinese at every opportunity." Paulson's comments came two weeks after the "strategic economic dialogue" talks in Washington, the second in a series of high-level discussions on economic ties between the US and Chinese governments. Paulson said the discussions produced "tangible results that have laid the groundwork for greater progress" including a new civil aviation agreement and accords for cooperation on energy, the environment, and financial services. But Chinese Vice Premier Wu Yi said elasticity of the yuan rate will be determined in an "orderly" manner," despite threats by US lawmakers of punitive tariffs on Beijing. Some analysts argue that Washington is too soft on China in terms of economic ties. "Offering China major power status by engaging it in multilateral dialogue will accomplish little, because the Communist party is much more concerned about maintaining its grasp on power than becoming a respected stakeholder in the global community," said economist Peter Morici of the University of Maryland in a recent commentary, arguing the yuan currency effectively gives Chinese products a 24 per cent subsidy. "Western democracies must recognise this unpleasant reality and deal with China differently than they do one another."