US Treasury Secretary Henry Paulson has warned that enacting legislation aimed at punishing China over its economic policies could jeopardize future growth and unsettle markets already on edge over the severe difficulties in the American housing and mortgage sector, the New York Times reported on Tuesday.
"I really do believe we are at an inflection point here," Paulson said in an interview with the newspaper on Monday. "When we look at taking unilateral actions aimed at another nation, this can have enormous repercussions to our economic well-being. You know, we're playing with fire."
Paulson said he remained confident that the American economy was resilient enough to survive recent market turmoil. However, he said he feared Chinese retaliation and a loss of China as an engine of global growth and a market for American exports.
Exports to China grew at the rate of 32 percent last year, and the Treasury Department says total exports contributed nearly a percentage point of the 4 percent growth of the second quarter of 2007, according to the report.
Paulson's office arranged for the interview to underscore his concerns after discussions with leading business officials, particularly in the financial services, manufacturing and automotive sectors, all of whom he said are depending on exports to help them get through current economic difficulties.
According to Paulson, all these leaders were concerned about legislation that would impose duties or other punishment on China if Beijing did not allow its currency, the yuan, to appreciate against the dollar, a move that would make Chinese exports more expensive and goods imported by China cheaper.
The business leaders feared that such legislation could lead to retaliation by China, Paulson said.
"There was a concern that, given what's going on in the global economy and the emerging protectionist sentiment in many parts of the world, it could be dangerous to take a unilateral punitive action that could lead to a trade war or that would be unsettling to the markets," he said.
(Xinhua News Agency September 12, 2007)