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Paulson takes softer line with China
(AP)
Updated: 2006-09-22 07:21

BEIJING - US Treasury Secretary Henry Paulson, superstar investment banker and Washington's new economic point man to China, stood before a student audience Thursday and talked about reading his children bedtime stories.

US Treasury Secretary Henry Paulson speaks to students and teachers at Tsinghua University September 21, 2006. He held a discussion panel with the students on China-Amerian relations. Pauson is in Beijing as part of his four-day visit to China.
US Treasury Secretary Henry Paulson speaks to students and teachers at Tsinghua University September 21, 2006. He held a discussion panel with the students on China-Amerian relations. [newsphoto]

Paulson was in Beijing at a time of high-decible arguments over trade deficits, currency and other issues. But he took an hour out of a packed schedule to speak at elite Tsinghua University, where he urged budding executives to make time for family as he also talked up the benefits for China of opening its markets to foreign business.

The appearance reflected the new Treasury secretary's two-pronged strategy for dealing with China, tirelessly cultivating personal contacts while presenting himself as a friend who is urging economic reforms that will benefit ordinary Chinese.

"I'm a huge believer in the Chinese economy," Paulson said earlier this week. He said he wants to nurture a "more productive tone" in strained trade relations.

The strategy is in contrast to Washington's other recent approach, which has called on China to be a "responsible stakeholder" in global affairs and to live up to its market-opening commitments. Some in China welcomed that tone, with its implication that Beijing was a major power, but economic disputes festered.

Paulson's background gives him unusual authority to talk with Chinese officials at the highest levels.

He visited China scores of times over the past 15 years, negotiating deals for Goldman, visiting farflung regions and amassing an array of contacts that includes senior Communist Party figures. This week, Vice Premier Wu Yi, a former trade negotiator, called Paulson a "true friend of China" who "understands even more about China than many Chinese people."

But in such a huge, complex relationship, such a background has only limited importance, said Andy Rothman, senior China strategist for the securities firm CLSA Asia-Pacific Markets.

"The Chinese are in this for the long run, just as the United States is, and they know that treasury secretaries will come and go," Rothman said. "They want to have a stable, productive relationship with the White House regardless of who the treasury secretary is, because that is in China's interest."

Instead, Paulson's resume might be a bigger asset in mollifying American critics who want to push Beijing more aggressively to rein in its soaring trade surpluses, Rothman said.

"He probably comes into this role with Wall Street and Congress looking at him as a real expert, therefore making it a little bit easier for him to convince them that he is taking the right approach," he said.

Paulson himself took pains to downplay expectations of breakthroughs from his trip. He said he wants to nurture a long-term discussion of major economic issues, not look for "quick fixes."

On currency, Paulson has been more conciliatory than his predecessor, John Snow, who pursued a tough line toward Beijing, insisting on faster action to raise the yuan's value.
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