Treasury Nominee Promises To Push China on Currency

By Elizabeth Kelleher
Washington File Staff Writer

Washington - President Bush's Treasury secretary nominee told Congress that, if confirmed, he would advocate for “open and level markets” for U.S. investments and products, focusing immediately on getting China to allow more flexibility in its currency.

Nominee Henry Paulson, chief executive of the Goldman Sachs financial firm the past eight years, testified at his Senate confirmation hearing June 27.  If confirmed, he will be the third Treasury secretary under President Bush, following John W. Snow - who announced his upcoming resignation May 30 - and Paul O’Neill.  Both Snow and O’Neill headed industrial corporations before joining the Cabinet.

Though pressed by senators on the committee, Paulson did not give an opinion about whether China should have been listed as a “currency manipulator” in a recent report from the Treasury Department to the Congress.  Such a designation would trigger formal negotiations with the country and ultimately could lead to sanctions. (See related article.)

Paulson said he could not have an opinion on currency manipulation until studying the relevant 1988 law, which was designed to prevent abuse of exchange rates for unfair advantage in exporting.  But, he said, he would “work with China to get more flexibility.”  Paulson is considered an expert on China, having traveled there many times for Goldman Sachs.

He said he hoped to get China to open its financial market to greater participation by U.S. banks, which he said was good for both U.S. and Chinese interests. Until China has a “fully functioning, modern financing system,” he said, it would not enjoy full participation in the global marketplace.

The nominee said that if confirmed he would work with his international counterparts to manage “global imbalances” and to “create greater opportunities for U.S. products and investments.”

For more information on U.S. policies, see The United States and China.


Paulson said he had not been briefed about a program in which Treasury examines financial records of suspected terrorists.  President Bush denounced U.S. newspapers for disclosing the existence of the program. (See related article.)

After the news reports, Treasury confirmed that it has made thousands of inquiries about country-to-country money transfers by individuals or entities under investigation for terrorism.  It uses subpoenas to access the information from a Brussels, Belgium-based, bank-messaging consortium called the Society for Worldwide Interbank Financial Telecommunication (SWIFT).

Paulson said that while financial privacy is an “important objective ... protecting the safety of the American people is essential.”

Senators from both parties indicated a willingness to confirm Paulson within days, in order to achieve a seamless transition from Snow’s tenure, which ends July 3.

For more information on U.S. policies, see Terrorist Financing.

A statement by Paulson to the committee is available on the Treasury Department’s Web site.