U.S. Treasury Secretary Henry Paulson (L) shakes hands with China's Vice Premier Wu Yi at Zhongnanhai in Beijing July 31, 2007.[Reuters]

China will never pose an economic threat to any country nor does it have the ability to do so, Vice-Premier Wu Yi told visiting US Treasury Secretary Henry Paulson yesterday.

She also suggested that the United States have a better grasp of China's economic situation and the challenges it poses.

Following a 30-minute private meeting with Paulson, Wu told the US delegation that she is happy to see her counterpart in the strategic economic dialogue (SED) be able to tell the great difference between Beijing or Shanghai and backward areas like Qinghai Province.

Paulson visited the poor and remote Northwest China province on Monday, the first stop on his fourth visit to the country since taking up the post in July last year.

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"I hope the Qinghai visit will enrich your future testimony to the US Congress," Wu said.

The US Treasury opposed a bill passed by the US Senate Finance Committee last week, which would give the US administration new tools to pressure China to float its currency in the open market.

Wu questioned how developed countries could view China as an economic threat when much of the country remains relatively poor.

She said China still has areas as underdeveloped as Qinghai and the very goal of its development is to feed and clothe the country's 1.3 billion people.

"Who could China threaten? We don't have the ability. We do not and will never be a threat to anyone," she stressed.

During another meeting, Wu and Paulson exchanged views on the topics and arrangements for the third session of the SED, which will be held in Beijing in December.

She said the twice-yearly forum, launched by the presidents of the two countries, and the successful implementation of promises made at the first two sessions reflect efforts made by the two sides to settle economic disputes through negotiations.

Wu said the third round should continue to focus on overall, long-term and strategic economic issues to play a positive role in promoting China-US economic and trade relations and overall bilateral ties.

Paulson agreed to keep close contact with China in the run-up to the third session.