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 Opening Statement by Secretary Henry M. Paulson


12/13/2006

HP-197

Before the Opening Session of the U.S.-China Strategic Economic Dialogue

Beijing, China- Good morning. It is truly gratifying to see so many senior leaders from two of the world's most important economies gathered together, in the spirit of cooperation, for this inaugural Strategic Economic Dialogue. Such an illustrious gathering certainly demonstrates the shared commitment of President Bush and President Hu to further economic cooperation and integration between our two countries.

This is also an historic opportunity, for our countries and for the global economy. As you know, in recent years the United States and China have accounted for almost half of global growth. The world looks to us together to provide lift to the global economy. Therefore, we have a responsibility to do our utmost to create the right environment for sustainable and responsible economic growth, both at home and abroad.

We have much to learn from each other. The Dialogue should help us manage and address the most important long term issues facing our two nations while providing a forum to address the most pressing short term issues. Over the next two days, we will discuss a number of issues surrounding China's economic development strategy and the challenges that China faces in the future. It is in everyone's interest that China's growth continues and in doing so that it strengthens the world economy. This Dialogue can help us work together to do just that while reducing tensions along the way. By continuing to pursue economic reform, opening its markets further, and rebalancing its growth to allow for increased domestic consumption, China will be sustaining its own growth while contributing even more to the global economy.

As China advances toward a "Harmonious Society," it will be important that growth is balanced so that the countryside is not left behind. I look forward to hearing your plans for addressing the structural causes of the rural-urban divide and other imbalances that have arisen. My colleagues and I also welcome the opportunity to share lessons from our own experience with social safety nets, labor mobility, and transparent and flexible fiscal spending to address income inequality.

To maintain domestic support for continued global economic integration, we both must pursue macroeconomic policies that facilitate balanced, sustainable growth and raise living standards. In a market economy, governments have several essential macroeconomic policy tools that can assure stable and balanced growth. In order to bring about balanced growth in China's dynamic and increasingly market-oriented economy, it is important that the government have full use of all these policy tools, including monetary policy, which would be more effective under a regime where currency values are determined in a competitive open marketplace based upon economic fundamentals. We believe that China should move toward such a system over the next several years. And of course you understand our strong view that in the meantime more currency flexibility is necessary. I look forward to having a good discussion about how to bring about balanced growth in China, a goal we both share.

Having spent most of my career working in financial markets around the world, it is clear to me that those nations that are open to trade, competition, and investment are the ones that succeed in today's global market. Just look at how much China has benefited from joining the WTO - a doubling of the size of your economy in just a few short years. The best way governments can serve the economic interests of their citizens is by welcoming healthy competition in all areas, including services. In particular, increased openness in financial services can be a catalyst for investment and growth in all sectors of an economy. Economies innovate through competition and openness to investment, and constant innovation fuels growth. I welcome the chance to share views on how we can best promote mutually beneficial liberalization and investment throughout our economies. And I look forward to discussing the principles of transparency, rule of law, and property rights, which are essential to expanding trade and investment flows.

Innovation and investment play a particularly important role in ensuring efficiency in energy use and the development of clean energy technologies. As the world's two largest consumers of energy, we share a special responsibility to both allocate and consume energy as efficiently and cleanly as possible. Open, transparent markets for resources and technologies are the best means of doing so. It is only through these means that we can achieve the economic growth and environmental preservation needed to improve quality of life in our own countries and around the world. The opportunity we have to advance this agenda is important to the entire world.

China's integration into the world economy has the potential to greatly enhance global prosperity. As you know, there is resistance in both our countries to greater integration into the global economy. And there is also skepticism that this Dialogue will accomplish anything of substance. Therefore, it is incumbent upon us, not only to have frank and energetic discussions, but also to produce tangible results on the most important issues facing our two nations. With the collection of talented people in this room, I have no doubt we will be able to do so.

In closing, I thank Vice Premier Wu Yi who I know paid attention to every detail of the preparations of this historic event. Under her leadership, the cooperation between our two countries has been extraordinary. I also thank President Hu and Premier Wen for hosting the first Strategic Economic Dialogue and providing this grand venue. I look forward to a fruitful two days of open exchanges of ideas with this illustrious group of Chinese leaders, which will lay the groundwork for a strong and mutually beneficial economic relationship between our two countries for many years to come.

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