China,US Need to Be More Open in Bilateral Relations, Former Treasury Secretary Paulson Says
Yicai Global
/SOURCE : Yicai
China,US Need to Be More Open in Bilateral Relations, Former Treasury Secretary Paulson Says

(Yicai Global) March 20 -- Relations between China and the US are important but face many problems, including economic and trade cooperation issues, Henry Paulson, chairman of the Paulson Institute and former US treasury secretary, said at the annual China Development Forum on March 18. The two countries have benefited from bilateral ties worth over USD600 billion.

As the US trade deficit widens, public opinion in the US is that there is an imbalance in the trade relationship between the two countries. Now is the opportunity to re-adjust that relationship, said Paulson. "I hope that the Trump administration will complete negotiations on the China-US Bilateral Investment Treaty, and I believe that it will welcome green land investment from China."

On the exchange rate, Paulson said there is no evidence to prove that China manipulated rates, though the Chinese monetary system has not yet reached the level of free floating of exchange rates and full opening of capital accounts. The country is making efforts in the right direction, he said, adding, "everyone wants the yuan exchange rate to be stable, or see a modest appreciation."

He believes the US decision to withdraw from the Trans-Pacific Partnership Agreement was a mistake, and China's participation in negotiations is beneficial to all parties.

Paulson also feels that globalization is misunderstood, and said thanks to international trading, ordinary Americans' wealth grew by an average of USD10,000.

After the presidential election, Paulson was most worried about strong public opinions. "People do not understand trade and feel globalization is a bad thing for the US. Trade can benefit everybody," he said, but added that it's time to take measures to make trade more balanced.

China has made great progress over the past decade, but it still needs to be more open, he claimed. Paulson believes a good way for the countries to expand ties is to negotiate on a sector-by-sector basis. The Bilateral Investment Treaty has also progressed well, he said, expressing hope that negotiations will be completed during Trump's time in office.

The US can provide more opportunities for Chinese-funded firms to invest in America, he continued, noting that China is becoming increasingly integrated into the global supply chain and getting more opportunities for foreign investment. Chinese companies have the opportunity to acquire small- and medium- sized American enterprises to gain access to the market. If you communicate with governors at a local level in the US, Chinese companies can get strong support as they help boost local investment and employment.

This is in contrast with the Administration's view as the central authority, said Paulson. Issues lie in national security and the reciprocal relationship. The US wants China to be more open so all parties can benefit mutually from bilateral relations.

As pointed out by Trump in his presidential campaign, some trade problems, like the exchange rate, cannot be avoided, said Zhu Min, deputy managing director of the International Monetary Fund, who also backed up Paulson's claim that there is no evidence China manipulated the yuan's exchange rate. The yuan has been improving for many years, but China still has a way to go to reach full and free currency floating and full opening of capital accounts, he added, saying the reforms are going in the right direction.

A market-based exchange rate mechanism may avoid the risk of asset prices caused by domestic imbalances and provides the monetary authorities with a tool to deal with inflation, added Paulson, who said he would encourage China to move forward in that direction.

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