U.S. raps China on competition

BEIJING (AP) — Influential Chinese companies that want to avoid competition are the biggest threat to more economic reform in China, U.S. Treasury Secretary Henry M. Paulson Jr. said yesterday.

Mr. Paulson’s comment echoed complaints by foreign investors that Beijing is trying to shield its companies by raising barriers to investment in insurance and other industries and hampering the foreign acquisition of Chinese corporations.

“I think the biggest threat to more reform in China is the strong domestic industry that doesn’t want competition,” Mr. Paulson told reporters as he wrapped up a two-day visit.

The secretary lobbied Chinese leaders earlier to open state-dominated financial markets wider to foreign competition and cut tariffs on imports of environmental technology.

The American and European chambers of commerce accuse Beijing of violating free-trade commitments by blocking access to banking and other financial industries to shield Chinese companies. The government insists it is abiding by its agreements but says it wants to create national economic champions in oil, banking and other industries.

Beijing still welcomes foreign investment, and the total rose 38.3 percent in February from a year ago to $6.9 billion, according to the government. But investors complain that acquiring an existing company in China is more difficult than it has been in at least five years, due partly to opposition from Chinese competitors.

On Wednesday, Mr. Paulson said the U.S. credit crisis might be making Chinese leaders hesitant about further financial reform. He said yesterday they were closely studying the impact on Wall Street but that he did not want to speculate about how they might react.

Mr. Paulson was in Beijing to prepare for a June meeting of a U.S.-China high-level dialogue meant to address tensions over China’s soaring trade surplus and to defuse demands by American critics for punitive action.

In a speech earlier yesterday at a government think tank, he called for closer cooperation on energy conservation and for Beijing to cut import duties on environmental technology.

Washington and Beijing agreed in December to cooperate over the next 10 years on climate change, energy security, promoting sustainable use of natural resources and other environmental issues. The United States and China are the world’s top two oil consumers.