Paulson warns against US-China economic decoupling

US-China economic decoupling will hurt the interests of the United States and jeopardize the global economy,former US Treasury Secretary Henry Paulson said on Thursday.

"Decoupling China from US markets by delisting Chinese firms from US exchanges is a terrible idea. So is forcing Chinese equities out of the MSCI indexes," Paulson said in a speech at the New Economy Forum in Beijing.

"It would eventually threaten US leadership in finance, as well as New York City's role as the world's financial center," he said.

Paulson said Washington should resist the temptation to seek decoupling with Beijing and the two countries need to take affirmative steps to signal that they still see the prospect of a shared future.

The former US treasury secretary also noted that China's future decisions could significantly impact interest rates and the US ability to manage its deficit.

"Let's not forget that China is a very large purchaser and holder of US treasuries. This helps support US monetary policy, enabling lower interest rates, and supporting our spending and lack of saving," he said.

Paulson also warned that US-China decoupling could result in interruptions in flows of people, capital and technology. And the decoupling could lead to a more serious situation where the US and Chinese technology systems and standards become separated.

Diverging standards will limit bilateral trade and investment and will fracture the global innovation ecosystem and curtail an enormous amount of potentially world-changing basic research, Paulson said.