U.S., China Differ on Timing, Not Goals: Paulson

The United States and China differ on how quickly they can resolve their economic disagreements, but not on the general goals, U.S. Treasury Secretary Henry Paulson said on Friday after meeting China's top two leaders.

Ending a three-day visit to Beijing that initiated a new high-level dialogue over trade, Paulson said he had substantive discussions on a wide range of issues with Prime Minister Wen Jiabao and President Hu Jintao.

But he declined to say whether talks included tensions over currency reform, a contentious issue as Paulson heads back to Washington where the Bush administration faces the challenge of calming restive U.S. lawmakers.

The swelling U.S. trade deficit with China has spurred moves in Congress to penalize Beijing unless it raises the value of its yuan, which some U.S. industry groups say is held artificially low to make Chinese exports cheaper.

I find it quite encouraging that there are very few differences on the principles of the issues, Paulson said, without specifically mentioning China's currency. Where there is discussion is on the timing.

The yuan rose on Friday to 7.9163 per dollar, its highest level against the dollar since it was revalued last year.

Paulson turned aside repeated questions by reporters about what was discussed on currency flexibility or whether he had been given any indication that Beijing may move more swiftly to let the yuan appreciate.

I would just simply say that I was encouraged by the meetings because they were substantive and candid and we talked about a range of issues, he said. I was just encouraged by the attitude in general about the dialogue and that they wanted to engage.

PROTECTIONIST URGES

During his visit, Paulson urged China to open its financial sector to foreign competition and warned that inaction on currency reform could bolster supporters of protectionism.

China's central bank governor, Zhou Xiaochuan, reiterated this week the country would gradually push to allow the yuan to be freely convertible and step up efforts to improve the openness of its financial sector.

On Wednesday, Paulson announced a new strategic dialogue intended to foster cooperation and Chinese officials have embraced the former Wall Street executive as a friend of China.

Wen and Hu met Paulson on Friday in separate meetings -- a striking gesture of goodwill from China's protocol-conscious leaders.

For a long time, Paulson had made positive contributions to exchanges and cooperation between our two countries in the economic and financial field, Hu told Paulson.

I am very willing to listen to your views and discuss issues that you are interested in, he said.

After 30 minutes of discussion, Paulson and Hu cleared the room except for their interpreters and talked one-on-one for 15 minutes.

We talked about individual issues, and quite a wide range, it was not a narrow range of individual issues, Paulson told reporters. But he refused to say what was discussed on currencies.

I've characterized it the way I want to characterize it, said Paulson, the former head of Goldman Sachs. I don't want to be led down some path.

Paulson said the discussions with Hu and Wen were enthusiastic. Both meetings ran beyond schedule.

POSITIVE EXCHANGES

The meetings didn't feel scripted, he said. There was enthusiastic exchange.

U.S. officials traveling with Paulson emphasized the significance of his success in getting a relatively lengthy meeting with Hu and contrasted it with his predecessor, John Snow, who they said had only met Hu for about two minutes at an official reception.

Before leaving Washington, Paulson said China faced critical, immediate challenges that called for speedy reforms, including a more flexible yuan, to keep its economy from veering out of control.

He took a diplomatic tack in Beijing, saying after the talks that the enthusiasm he sensed from Chinese leaders broke on the high side of my expectations.

Speaking to students at Tsinghua University in Beijing on Thursday, Paulson repeated Washington's call for China to open its capital markets.

The U.S. Treasury chief, who took office in July, said freeing up financial markets was absolutely necessary for long-term economic success because it would allow more efficient investment and greater returns for China's rising savings.

U.S. officials have said the new strategic dialogue with China will not overshadow immediate concerns over the yuan exchange rate and an expanding bilateral trade gap, which topped $200 billion last year.

Paulson heads back to Capitol Hill to try to persuade lawmakers he made progress on the currency issue.

On Thursday, a senior Republican Senator said a bill aimed at forcing China to change its currency policies by threatening a 27.5 percent tariff on its exports to the United States was likely to receive Senate approval.

Senate leaders have promised Sens. Charles Schumer, a New York Democrat, and Lindsey Graham, a South Carolina Republican, a vote next week on their bill threatening China with punitive tariffs.

(Additional reporting by Chris Buckley)