U.S. Treasury Secretary Henry Paulson leaves after making closing statements after the 5th U.S.-China Strategic Economic Dialogue in Beijing, December 5, 2008. (Jason Lee/Courtesy Reuters)
With the glaring exception of Japan, Asian economies are recovering earlier and stronger from the crisis than nearly all others. And China has now cemented its place alongside the United States and Europe as a growth engine.
But China faces large—and intensifying—vulnerabilities.
Readers of Asia Unbound will know that I’ve talked here and written here about some of these challenges.
And so I thought I’d flag for interested readers a major speech delivered this morning in Washington by former Treasury Secretary Hank Paulson (full disclosure: my boss).
He has a deep history with the U.S. and Chinese economies—at Goldman Sachs, and then as the Treasury Secretary. As a banker, he worked on historic but thorny issues in China, like privatizations. And at the Treasury, he established the Strategic Economic Dialogue and played a central role in the creation of the Ten Year Energy and Environment Cooperation Framework.
The basic thrust of his speech is twofold:
First, both countries face growing economic challenges and vulnerabilities. And for its part, it is decidedly in the U.S. interest for China to get ahead of these challenges. As Paulson puts it, “China’s success at sustaining growth, fighting inflation, and transitioning from an economic model too dependent on exports and fixed asset investment is closely connected to our own success.”
Second, “the U.S. and China need to take steps—mostly individually, sometimes together—that will have the mutually beneficial effect of supporting and sustaining economic growth.”
That’s a striking formulation because it’s not focused on “cooperation” for its own sake. Rather, as Paulson argues, the U.S. and China “don’t always need to act jointly.” They can take separate and self-interested steps that, in the bargain, put their two economies onto a more complementary footing.
You can read the entire speech here, or watch it delivered here.
But for the central message, here are his five principles—let’s call them, “Paulson’s Principles”—quoted verbatim from the speech:
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