Former U.S. Treasury Secretary Henry Paulson said on Sunday the United States should support the success of economic reforms in China, which is critical to both countries and the global economy.
In an op-ed piece published in The Washington Post, Paulson said "China has made two principal contributions to global growth" in recent years by sustaining its own growth in the wake of the 2008 financial crisis and serving as a demand driver for the commodity and industrial exports of other countries.
China, however, needs "transition to a new economic model while restructuring local debt resulting from its flawed current model," Paulson said, adding that the recent slowdown of China's economy "reinforces the urgency of reforms that will establish the foundation for slower, but higher-quality, growth."
Paulson, a veteran China expert, said China's leaders understand this challenge of economic transition, and he believed China "has the necessary tools and financial capacity" to deal with it while accelerating the economic reform agenda.
"The United States, for all its differences with Beijing, should be rooting for China's economic reformers to succeed," he said.
In Paulson's views, China, as a large holder of U.S. treasury securities, also has a lot at stake in "whether the United States undertakes urgent fiscal, tax and structural reforms that will allow our economy to grow faster."
While the U.S. and Chinese economies are "increasingly complementary," there are lack of policies to better enable direct investment in each other's markets and provide companies a level playing field, said the former U.S. official who served as treasury secretary from 2006 to 2009.
"One way to assure these gains would be through a high-standard bilateral investment treaty (BIT) that supports reforms in China while giving China a fairer shot at the U.S. market," he said, urging both countries' leaders to move forward the investment treaty talks that began in 2008.
"Negotiations have bogged down over the scope of market-opening on each side. Xi and Obama need to give their negotiators a lift," Paulson said of the upcoming summit between Chinese President Xi Jinping and U.S. President Barack Obama in Washington. [Special coverage]
In a letter sent to the two presidents last week, which was signed by 94 American chief executive officers (CEOs), U.S. business leaders expressed their firm support for "the rapid conclusion of a meaningful and high-standard BIT" between the two countries and hoped "significant progress can be made on this historic agreement" during the Xi-Obama summit.
Paulson said the United States and China should also cooperate in the areas of international economic governance. "Global economic institutions simply will not adapt to 21st-century realities and function effectively without U.S.-China coordination," he said.
He urged the United States to implement governance reforms in the International Monetary Fund and the World Bank to give China and other emerging economies a role that reflects their weight. "Unless we do, economic governance will further fragment," he warned.
In terms of the China-proposed Asian Infrastructure Investment Bank, Paulson said the United States should become an observer or even join it, in a bid to encourage existing institutions to work with it to shape its rules and practices and jointly fill Asia's multitrillion-dollar infrastructure needs.
"Having China as a key participant in an evolving rules-based global economic regime has the potential to mitigate foreign policy conflicts between the United States and China," he noted, adding that the shared economic interests "have formed the core of the U.S.-China relationship since the end of the Cold War."