QINGHAI LAKE, China - US Treasury Secretary Henry Paulson saw for himself on Monday efforts to reverse environmental degradation around China's largest inland lake, taking the spotlight off currency tensions for a day.

"Climate change is a very important issue in this country, it's very important globally and it's very important in the US" Paulson told reporters during a visit to the Qinghai Lake, which is shrinking due to rising temperatures.

"By coming here I call attention to what China is doing environmentally and reinforce what they're doing."

Paulson, a longtime environmentalist who chaired The Nature Conservancy, said he was impressed with a programme funded by the central government to reclaim advancing desert areas near the lake by planting vegetation on sand dunes and former farmland.

He said Qinghai Lake and glaciers on the Tibetan plateau were important for the global climate because shrinkage of the lake and melting of the glaciers could permanently shift the jetstream, bringing severe weather to other continents. Likewise, carbon emissions elsewhere could hasten the lake's demise.

He said engagement on environmental issues was important to US President George W. Bush to formulate a plan for reducing greenhouse gas emissions.

The tougher part of Paulson's China trip will follow in Beijing, where he will meet Vice Premier Wu Yi and Central Bank Governor Zhou Xiaochuan on Tuesday and President Hu Jintao on Wednesday.

He said he would again press for faster appreciation of the yuan and other reforms, such as rebalancing China's economy away from exports and toward more domestic consumption and increasing foreign access to China's financial services sector.

Paulson's visit comes as US lawmakers, frustrated with slow progress in reducing US trade deficits with China, are advancing legislation aimed at pressuring Beijing to allow open markets to set the yuan's value.

The US Senate Finance Committee last week passed a bill that would allow companies to seek anti-dumping duties against products from countries that have "fundamentally misaligned" currencies and eventually intervention by the Federal Reserve.

Paulson said he was concerned about the currency legislation, saying it was the wrong approach, and he preferred achieving currency and economic reform through bilateral and multilateral dialogue.

But he understood the motivation behind it and frustrations among Americans about trade imbalances.

"I don't want China to become an increasingly big political issue in the US," he said.