U.S. Treasury Secretary Henry Paulson said on Monday a strong U.S. dollar was in the interest of the United States and he was not seeking any quick fixes on China's currency situation.
Paulson, just before he is due to head to China for his first official visit, was briefing reporters after meetings at the annual International Monetary Fund and World Bank meetings.
A strong dollar is clearly in our nation's interest, Paulson said. I believe that when foreign governments or foreign investors...choose to buy U.S. securities they've got confidence and they know they're getting the best risk-adjusted rate of return.
Paulson's remarks about China gave the U.S. dollar a fresh boost as the market interpreted this as a sign that the United States would not step up pressure on Beijing to allow its currency to strengthen faster. The dollar edged up yen to a fresh five-month high of 118.23 yen`.
The former Goldman Sachs chairman, who met fellow finance chiefs from the Group of Seven (G7) industrial countries on Saturday for the first time as U.S. Treasury chief, is headed for China on Tuesday to try to persuade Chinese authorities to move forward on introducing greater currency flexibility.
G7 countries on Saturday singled out China for not doing more to help iron out global trade imbalances. But China on Sunday brushed aside calls to take the yuan off its tight leash and said it would stick to its policy of letting the currency climb only gradually.
As he has done before, Paulson warned against expecting Beijing to act quickly to let its yuan currency rise in value as U.S. lawmakers want.
It takes a while and I'm not looking for immediate solutions or any quick fixes to particular situations, Paulson said.
When sovereign nations are working on important issues, to make progress you need to convince the other side ...that what you're proposing is in their best interest, Paulson said.
In the case of China it takes a process where you're talking to all of the right people, he added.
Paulson is scheduled to arrive in Beijing on Wednesday morning and will be there until Friday. He flies from Singapore to Hangzhou, a region of China known for its robust free-enterprise orientation, on Tuesday for one day before heading into a round of official talks in Beijing.
I'm looking to set a tone and an expectation of working through issues and making progress, Paulson said, adding The fact that I keep steering you away from short term doesn't mean I don't like results.
U.S. lawmakers are pressing for quick action by China to let its yuan appreciate in value, claiming that U.S. markets are being flooded by unfairly cheap Chinese-made goods and that American jobs are being lost as a result - a powerful theme on the campaign trail ahead of November congressional elections.
Paulson is aiming to place the currency issue among a broader array of mutual concerns, including efforts to promote freer global trade through restarting Doha trade talks and discussing how to bring down global imbalances.
I'm only going to be in this job for 2- years and I'll be judged by results and hopefully by setting a tone and building upon what is already a good relationship that has been strengthened significantly by this administration, he said.
Paulson took over Treasury in July following the resignation of former Treasury Secretary John Snow, becoming the Bush administration's third Treasury chief.
China freed its currency from a peg to the U.S. dollar in July 2005 and revalued it by 2.1 percent, but since that time it has appreciated only about another 2 percent, prompting cries of outrage from the U.S. Congress.
Paulson said that all the G7 participants meeting in Singapore on Saturday agreed that currency flexibility was important and that imbalances need to be reduced.
I said to my colleagues, sitting around the table at the G7, that I wasn't minimizing any of the other risks that we were talking about, I wasn't minimizing the imbalances, but I felt the biggest risk for all of us was protectionist sentiment in one form or another, Paulson said.