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Paulson defends bailout plan, nudges China on yuan

By Qi Xiao (chinadaily.com.cn)
Updated: 2010-04-10 10:01

Former US Secretary of Treasury Henry Paulson defended US government's bailout plan during the financial crisis in his one-on-one discussion with Long Yongtu, Secretary General of Boao Forum for Asia (BFA) early this morning ahead of the opening ceremony of the forum's annual conference.

Paulson said the US was forced to take the action rather than ditching market principles.

"The US had to step in, to intervene and to rescue the failing institutions," he said, "The alternative would be much worse…It would be a disaster."

He also defended the US government's decision about Lehman Brothers.

When Long asked him whether Lehman Brothers "was treated differently" during the crisis, he responded by saying "we worked hard to save Lehman Brothers and we would have liked to save it", but "we didn't find enough legal authorities" to achieve it.

He praised China's "constructive role" in the crisis, but talked quite diplomatically about the ongoing debate on the exchange rate of yuan.

"China is a sovereign nation," he said, "it could do whatever it sees fit."

However, it is "in China's interests" to move the currency freely, he said, as "it could help the country deal with inflation and stimulate domestic consumption."

In the US, currency flexibility is "the symbol of China's commitment to reform", which China has witnessed much progress, he said.

But the US should resolve the whole issue about yuan through a "manageable" manner with China, rather than pursuing protectionist measures as what the US Congress is doing, he emphasized.

BFA held its first meeting in Boao, a resort town in Hainan province, in April 2002. This year's meeting, which will last for two days, opened on Saturday morning.