Paulson doesn't see China as enemy

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ASSOCIATED PRESS

Treasury Secretary Henry M. Paulson Jr. says the economy is healthy, inflation seems under control and the U.S. should not perceive China as an economic enemy.

Mr. Paulson, who this week makes his third visit to China as Treasury secretary, said in a television interview broadcast it is essential that both countries have strong economic ties. The former head of the investment company Goldman Sachs has said China is moving too slowly in overhauling its currency system and cracking down on copyright piracy. U.S. businesses blame these factors for the soaring U.S. trade deficit with China.

"I would say that our relationship with China is multifaceted, and it's a very important relationship for the U.S. And I don't believe we need to make China an enemy," Mr. Paulson said.

Democrats in Congress have criticized the Bush administration for doing too little to protect U.S. workers from unfair foreign trade practices. Mr. Paulson thinks protectionist barriers in this country would hurt U.S. consumers and make the United States less competitive.

"[China's] whole economy is developing; their capital markets are not nearly as developed as their manufacturing economy. They're not reflective of the Chinese economy overall. They're largely cut off from the global capital markets," he said.

"But as they reform those capital markets and as they open them up to competition, this will make it possible for them to have a currency that trades in a competitive marketplace. This will help their economy develop in a way [that] it'll be good for them and good for us, because there will be a bigger market for our exports," Mr. Paulson said.

After a week in which the Dow Jones Industrial Average posted its worst weekly performance in more than four years, Mr. Paulson said yesterday that he felt good about the economy and discounted the chance of an economic downtown.

"Markets never move in any one direction forever in a straight line. And so I look at it and put it in perspective and say, over the last year, the Dow's up almost 11 percent, [the Standard & Poor's 500] up 9 percent, and I'll take it," Mr. Paulson said.

The Dow dropped 416 points Tuesday after big declines in China and other countries. The Dow fell 533 points for the week, rattling investor confidence about the state of the U.S. economy.