Paulson in China: Tread softly, forget the big stick...

[bridgit]

'As US Treasury Secretary Henry Paulson began his visit to China on Tuesday, he brought with him what has been dubbed a "dream team" of half a dozen cabinet secretaries including those of Commerce, Energy, Labor, Health and Human Services, the US Trade Representative and, most significantly, Federal Reserve chairman Ben Bernanke.

The mission? To address what Washington views as the perennial irritants in Sino-US economic relations - trade imbalance, undervaluation of the Chinese currency, lack of intellectual-property protection and, what is perhaps the most important, US companies' access to China's market.

Since becoming treasury secretary last July, Paulson has become the principal US interlocutor by initiating high-level economic dialogue with Chinese leaders. During his September visit to China, Paulson not only managed to meet both President Hu Jintao and Premier Wen Jiabao, he generated a lot of expectations that as a recognized "China hand" - as chairman and chief executive officer of the investment bank Goldman Sachs, Paulson visited China more than 70 times - that he could deliver on charting a new course for US-China economic relations without resorting to trade wars between the two countries.

While the Chinese currency has undergone modest appreciation since the summer, it is still considered significantly undervalued. That, together with government subsidies, underpins sustained Chinese exports globally, but especially to the United States, registering a high of US$23 billion in September.

US lawmakers such as Senators Charles Schumer and Lindsay Graham have proposed a 27.5% across-the-board tariff on all Chinese imports until China revalues the yuan. While Schumer praised Paulson's efforts to engage the Chinese to address US concerns, he could reintroduce the bill should Paulson's mission fail to achieve any meaningful result.

However, the most serious complaint these days is about the alleged denial of market access to China for US businesses. As US manufacturing sectors continue to lose jobs, there is growing pressure on the administration of President George W Bush and Congress to exert pressure on China to open its market more so that US companies have a fairer chance of competition, in compliance with its obligations to the World Trade Organization.'

http://www.atimes.com/atimes/China_Business/HL13Cb02.html