Paulson urges China to boost domestic economy

Washington: The US treasury secretary Henry Paulson has said that China should introduce more measures to boost domestic demand, and has stressed continued reform of he country's exchange rate policies.

Speaking at the World Affairs Council ahead of a visit to Beijing for two days of discussions, Paulson said that it was imperative for China to continue to allow its currency to rise in value, and open its markets.

"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 per cent against the dollar since 2005 -- this is important and significant, but it is important that the process continue." Chinese currency, the renminbi, is also known as the yuan.

Paulson said China needs to reduce its dependence on exports as a driver for its economy, while praising Beijing for accomplishments it has achieved in its bid to help restore global economic growth.

Paulson termed China as a ''very responsible partner'' and a stakeholder that stood by the US during its challenges of the financial market. He said that it was important that the United States, China and others nations take ''whatever further actions are necessary'' in order to stabilise the financial system, hinting at appropriate monetary, fiscal and financial regulatory policies.

Paulson also said that the US cannot let its auto industry fail, which meant that the US automakers need to be kept out of bankruptcy. "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.

Paulson also said that a government aid package would have to be one that leads to a viable industry.

Paulson met with Chinese cabinet officials this week for the fifth, and his final round of ''strategic economic dialogues'' that seek to discuss issues ranging form energy, the environment and the economic crisis. It is not yet clear if President-elect Obama's administration would continue with the dialogues, whch are increasingly defined by the $35.2 billion trade surplus China currently holds.

For its part, China has recently taken measures such as increasing tax rebates for exporters to provide some relief from the economic slowdown. The rebates are aimed at keeping goods exported to the US and Europe staying relatively inexpensive, even though it would also cause a larger surplus for China.