Editor's note: This story is based on an exclusive interview with US Treasury Secretary Henry M. Paulson by senior reporter Zhao Yining of the 21st Century Business Herald

US Treasury Secretary Henry M. Paulson said the strategic economic dialogue (SED) not only helps lay out principles and priorities, but also achieves tangible results.

"We have to keep making progress because we need some sign posts to show that we are not just talking the talk but walking the walk," Paulson said.

Like riding a bike, technically, the slower you ride, the more likely you are going to fall, he said.

"The reason I want progress so much now is that, with the presidential election coming up, I don't want people in the United States to use the lack of progress as a reason for saying: 'Dialogue doesn't work, we need tougher legislation or we need to make China an issue in the election'," Paulson said.

He said there is a certain amount of skepticism in the US about China's intentions when it comes to trade, but the SED is the vehicle to maintaining the good relationship and clearing misunderstanding between the two big economies.

He emphasized that the SED is not a meeting, or a series of meetings.

"The SED is a framework to maintain the strategic relationship; it allows us and our counterparts in China to seek one voice at the highest level; it is also to prioritize issues under broad context and give us strategic direction; and it is to resolve concerns on each side.

"We are going to define success by the ability of people on both sides to manage the relationship over the long term, prioritize the critical issues and achieve tangible progress on these issues. So people on both sides can measure the progress," Paulson said.

Addressing trade imbalances without slowing down economic growth, greater openness of markets to competition, trade and investment, cooperation in energy and environment, and reform in financial and non-financial services are among the areas where Paulson expects to see some tangible results.

He also urged China to increase the flexibility of its currency, saying it is a symbol or indication of economic reform.

Another benefit of the SED is that the United States is listening and learning, Paulson said.

"That is one of the things I have emphasized to my colleagues that people in the US, by nature, like to talk more than listen, and by listening, we can learn," he said.

Vice-Premier Wu Yi can be a great teacher, he said, referring to Wu's good personal relations with some Congress people.

During the two-day dialogue, Wu will deliver a speech in the Congress and discuss issues that both countries are concerned with.

She did a good job by developing good relations with some congressmen, since they hold views that are in many ways reflections of the views of their constituency, Paulson said.

"This is an opportunity behind closed doors, not with the press there, not with the public, to have a dialogue (with those congress people)."

Recognizing that both China and the US have been working on those objectives, Paulson said he is not going to guess where the SED is going to make the greatest progress, but it is going to make some progress in all these areas.

In the non-financial services area, "we are talking about an open sky agreement between China and the United States, which will give greater access to each other's markets in terms of air cargo and personal travel", he said.

As for the currency issue, Paulson said he does not have a timetable for the yuan to be more market-determined, but urged more flexibility in a short period of time.

"China is a sovereign nation, China shouldn't set its agenda or timetable based on requests from other people," he said.

Different from 20 years ago, China now feels more pressure from other countries, he said. "There was no tension over trade, because there was no trade. Today there is so much, so you need to expect that.

"The Chinese economy is increasingly big and complex, and it is a partly planned economy and a partly market-driven economy, either at central or provincial level, and on the path to a fully market-driven economy," Paulson said.

"I believe the larger and the more complex the economy is, and the more integrated into the global economy, the more important it is to speed up the pace of reforms."

People in the US are "watching and they are going to say: 'How quickly China is moving to open its markets to competition, goods and services", Paulson said.

"What I want to say is: The longer you wait, the more difficult it is because you get vested interest groups who are trying to protect their own interests, so we should support competition rather than certain individual competitors."

China Daily

(China Daily 05/22/2007 page5)