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Paulson’s dilemma in China

Steve Tripoli Sep 18, 2006


SCOTT JAGOW: China’s economic surge has it butting heads with the U.S. on a lot of issues. One of the big ones: the value of the Chinese currency. Many believe that’s the root of the widening trade gap between the U.S. and China. Treasury Secretary Henry Paulson arrives in China tomorrow to talk about that and some other issues with the Chinese. More now from Steve Tripoli.

STEVE TRIPOLI: Critics from both parties want Paulson to push the Chinese harder on raising the value of their currency.

The Chinese have long resisted any significant appreciation, but Paulson argued in a major speech last week that China’s economic policies also need fixing for China’s sake.

Hank Levine of Stonebridge International consulting says the two sides aren’t as far apart as they might seem on these issues.

HANK LEVINE: “The direction is clear. The challenge really is, working at a pace that makes the Chinese feel that they can manage the situation domestically and on the other hand conveying to people in the States, particularly in the Congress, that indeed progress is being made.”

That’s where Paulson’s Congressional critics might come in handy. They’ve filed a bill that would tax all Chinese imports to pressure the Chinese on the currency issue.

Adam Segal of the Council on Foreign Relations says that even though Paulson opposes the bill it may strengthen his bargaining hand in Beijing.

ADAM SEGAL: “Paulson can tell the Chinese look, help me out, do these things or we have these huge, bills in the Senate that can really make our relationship much more difficult.”

All this juggling of national interests with pressures back home makes the forecast for big movement in this week’s talks unlikely.

I’m Steve Tripoli for Marketplace.

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