Treasury Secretary Paulson speaks on China
US Treasury Secretary Henry Paulson outlined his views on US-China relations, please find below the 25% Copernic summary, and link to full speech. I read a lot every day, so I cannot manage to read all important speeches, Copernic Summarizer does a pretty good job in getting main points.
Paulson speech tags by Copernic:
economy China competition growth nations “United States” reforms “global economic leader” investment responsibility protectionism Chinese globalization trade jobs
One week from today, I will be in China to discuss the economic relationship between our two nations.
The prosperity of the United States and China is tied together in the global economy, and how we work together on a host of bilateral and multilateral issues will have a significant impact on the health of the global economy.
Half of all global economic growth in the last five years has come from the United States and China, and our two economies will continue to be the drivers of growth in the future.
Yet many view the growth of China and its increasing importance as the clearest and most tangible threat of globalization.
Those who welcome China’s growth and integration into the world economy, as I do, should confront this argument directly.
One lesson is that those nations that reform their economies and open themselves to competition benefit their citizens greatly.
At the same time, those nations that try to close themselves off from competition, hinder free markets, and fail to invest in their people, simply get left behind.
One area where I have personal experience is in financial services where I am a strong advocate of opening up the domestic capital markets and financial systems of our trading partners to international competition.
Healthy capital markets are absolutely critical to any nation’s long-term economic success.
And I don’t know of a single example of a nation which has a strong financial system and strong capital markets that has not opened itself up to foreign competition.
Our economy is by far the world’s strongest because it is built on openness — openness to people of all nationalities, openness to new ideas, openness to investment, and openness to competition.
Our proven success has allowed us to effectively advocate free trade and open markets here in the United States and around the world.
What Myrdal referred to as the Asian Drama is now the Asian miracle, with hundreds of millions of people freed from poverty.
In 1986, the Vietnamese launched the Doi Moi program of economic reforms that liberalized Vietnam’s economy and began to open it to foreign trade and investment.
When I visited Vietnam, I spoke to its leaders, but I also spent time with young entrepreneurs and students.
Rapid economic growth in Vietnam and other nations around the world benefits Americans by adding to the growth of the global economy, and over time, creating greater demand for our products and more jobs for our workers.
By closing off competition and blocking the forces of change, protectionism reduces the losses of the present by sacrificing the opportunities of the future.
I believe it is the responsibility of all nations to search for ways to moderate income disparities and help those who lose their jobs to international competition.
As the President has repeatedly emphasized, the most effective method for generating new, high-quality jobs, and higher living standards, is to develop the skills and the technologies that promote economic competitiveness.
Countries that implement market-driven policies which provide their citizens greater economic freedoms, find that those citizens also naturally seek a greater stake in their political system.
But it does mean that economic liberalization — with the interdependence and the growth that it brings — can play an important role in advancing the cause of peace and stability.
As a global economic leader, China should accept its responsibility as a steward of the international system of open trade and investment.
China’s remarkable success since market reforms began in 1978 has led many to predict that its meteoric growth will continue indefinitely — that we can extrapolate its future growth from its past performance — as if China has somehow found a way to immunize itself from business cycles and all other economic problems.
Another area where we look to Chinese leadership is for help reviving the Doha round of trade negotiations.
China now faces a difficult but essential phase in its development and the reforms it must continue to pursue will not be easy.
Up to now, rapid growth has been achieved by shifting excess labor from agriculture and state-owned enterprises to market-based manufacturing.
Today, as the most obvious sources of inefficiency are disappearing, growth will depend on raising productivity which, in my judgment, will require markets to allocate capital as opposed to administrative decisions.
The Chinese have an astonishingly high savings rate — 50 percent of GDP — because Chinese households face so many uncertainties.
China needs a more harmonious, more balanced pattern of growth that gives Chinese households more income and the confidence to spend it.
These challenges are made even more difficult by the fact that within China, as in the U.S., there are loud voices espousing anti-reform, protectionist sentiment.
In China this resistance stems from a number of factors including that the benefits of this economic expansion have been spread unevenly among its citizens and that some influential people have never fully embraced the need to open up the Chinese economy to competition.
This protectionist sentiment is evidenced by increasing levels of public discontent, demonstrations, and anti-reform articles written by prominent academics.
Over the last couple of years in my prior role, I was struck by the fact that some of the anti-trade sentiment manifesting itself outside our nation is turning into anti-China sentiment as more people in nations around the world are viewing China as a symbol embodying both the real and imagined downsides of global competition.
I believe that if China doesn’t move quickly to continue reforming its economy, it will face a backlash from other international economic stakeholders.
The United States has its own responsibility to help China continue its structural reforms and its transition to a market-driven economy that welcomes competition.
These include keeping our markets open to trade, to foreign investment and maintaining the flexibility and rapid productivity growth that has made us a driving force in the growth of the global economy.
On energy, China, which was self sufficient in oil until 1993, is now the world’s second largest oil consumer behind the United States.
Since much of the oil we both need is found in troubled regions of the world, China and the U.S. have common incentives to minimize regional instability while reducing our dependence on foreign oil.
There are also important opportunities to work together to preserve and protect our environment.
They have to breathe the air, drink the water, and witness the environmental degradation on a first hand basis.
This demonstrated to me in a very tangible way that the U.S. and China share the goal of creating a cleaner China and a cleaner planet.
And we can and should be sharing technologies and best practices to protect our environment as we are through the Asia Pacific Partnership for Clean Development and Climate, along with Australia, India, Japan, and South Korea.
This initiative, which was established last year under Secretary Rice’s leadership at the State Department, is an innovative public-private partnership designed to address issues of the environment, energy security, and climate change in ways that promote sustainable development.
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.
China cannot achieve its goal of being a modern economy if it fails to adhere to the rule of law and fair trade and encourage the innovation that is the engine of growth for developed — and developing — economies.
The United States has a huge stake in a prosperous, stable China — a China able and willing to play its part as a global economic leader.
The choices you make will affect many things from the air we breathe to price of our farm products.
And, of course, of vital importance to you is a United States of America with a healthy, growing economy which believes you are committed to being a responsible global economic leader dedicated to moving forward with your economic reform agenda and fair trade.
The full speech is here