US Treasury Secretary Henry Paulson (2nd R) and Zhou Xiaochuan, Governor of the People's Bank of China (R) speak at the trading floor of the Shanghai Futures Exchange in Shanghai March 8, 2007. [Reuters]

SHANGHAI - US Treasury Secretary Henry Paulson Thursday urged China to speed up opening its financial markets to promote economic growth and stability.

"Because of its size and its role in world markets, China is already a global economic leader and deserves to be recognized as a leader. And with leadership comes responsibility." Mr Paulson said in a speech to business leaders at the Shanghai Futures Exchange [transcript of Paulson speech].

The responsibility includes pace and shape of China's economic reforms, which mean forming quickly toward transparent, liquid, stable capital market.

"The risks for China are greater in moving too slowly than in moving too quickly toward transparent, liquid, stable capital markets," said Paulson, a former head of investment powerhouse Goldman Sachs.

Paulson, who this week makes his 3rd visit to China since joining President George W. Bush's cabinet last July, warned that China's growth is becoming increasingly imbalanced between regions, households and industries.

A freer and more developed financial system would help allocating capital, the secretary said.

"Financial sector development is the key to China's transition into an economy that is less reliant on industrial activity, produces more high value-added products, and reduces the intensity of natural resources consumption," he said.

His policy prescriptions for China included strong property rights, robust supervision by regulators, sound accounting and governance standards, stronger financial institutions and independent credit rating agencies.

Paulson said the economic relations between the US and China are vital to the future of the global economy, the disagreements between the two countries are not about the direction of change, but about the pace of change.

With its economy growing at a rate of about 10 percent annually, China should act fast, he said.

"One lesson I have learned over the years is that although perhaps not as easy politically, it is better to implement reforms during periods of economic strength," Paulson added. "Time is of the essence."

"Paulson's remarks recognized China's economic position," Huang Renwei, vice president of Shanghai Academy of Social Sciences told China Daily Website, "but as to financial markets opening, it can't be done soon, it needs more time."

Henry Paulson arrived in China on Wednesday on a two-day visit.

Paulson met in Beijing with Chinese Vice Premier Wu Yi, a former trade minister, China's most powerful woman and a key point person for dealings with Washington. Those talks were in preparation for the next round of talks called the China-US Strategic Economic Dialogue, meant at defusing tensions through collaboration on a wide range of issues.