China must swiftly adopt a more fully market-based economy and flexible currency exchange rates or risk losing its ability to control its economy, US Treasury Secretary Henry Paulson said on Wednesday.
"China faces several critical, immediate challenges," Paulson said at the Treasury in remarks intended to set the stage for a key trip to China next week following weekend sessions in Singapore with other world financial leaders.
Paulson noted the United States and China were the key drivers of the global economy and will remain so, and made clear he will oppose any measures in the US Congress to impose tariffs or other protectionist measures against swelling Chinese-made imports.
"We will not heed the siren songs of protectionism and isolationism," Paulson said. But he stressed that Beijing needs to step up the pace of reforms to keep its own economy healthy and to play its role in stabilising global expansion.
"The first is the pressing need to put in place widely accepted, market-based tools to keep its economy from veering out of control," he said. "A much more flexible, market-driven exchange rate along with a more nimble, self-determined monetary policy are key ingredients to stable and sustainable, non-inflationary growth."
Paulson will meet his counterparts from the G7 - Britain, Canada, France, Germany, Italy and Japan - in Singapore on Saturday on the sidelines of semi-annual meetings of the International Monetary Fund and World Bank. Paulson indicated he would like to see a revival of the stalled Doha trade liberalisation talks, and sounded a strong note of disapproval of any effort to impose protectionist trade measures, as some US lawmakers are threatening against China.
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