For Immediate Release: May 4, 2007

Contacts:	Jim Aisner, jaisner@hbs.edu, (617) 495-6157

U.S. Treasury Secretary Hank Paulson Speaks at Harvard Business School

HBS Alumnus Examines Economic Relationship between U.S. and China

Hank Paulson at HBS Photo: Stuart Cahill

BOSTON - A member the MBA Class of 1970, Secretary of the Treasury Hank Paulson returned to Harvard Business School yesterday to talk about the U.S.-China economic relationship before an audience packed with HBS students as well as students from Harvard Law School and the Kennedy School of Government.

Noting China’s size and the extraordinary growth of its economy, Paulson said that China deserves to be recognized as a global economic leader. And “with leadership comes responsibility,” he said. “China’s economic reforms as well as its policies relating to energy and the environment are going to affect nations around the world for many years.”

China’s role in the world economy has also led to concerns in this country, particularly in regard to the trade deficit and the value of the Chinese currency, the renminbi (RMB).

HBS Dean Jay Light and Hank Paulson Photo: Stuart Cahill

One way of bringing about solutions to these concerns, Paulson said, is a series of strategic economic dialogues (SED) involving leaders of both nations that began in Beijing last December and that will continue in Washington, DC, later this month.

According to Paulson, among the items on the SED agenda for China are structural reforms in its financial and non-financial services, improvements in dealing with energy and the environment, the creation of frameworks that foster innovation and protect intellectual property, and attempts to increase domestic consumption. “A major facet of our discussion,” he said, “is the need to rebalance domestic growth so that domestic consumption plays a larger role in driving China’s economic growth. This is a goal that both the U.S. and China share.”

The former chairman and CEO of Goldman Sachs, Paulson also pointed out the need for more efficient and transparent capital markets in China and for adjustments in the value of the RMB. “Currency does have an impact on trade balance,” he said. “There are many countries in the world that don’t have market-determined currencies, but there’s no country as important economically as China that doesn’t. They are not going to be able to develop the financial markets and banks they want unless they have a currency that reflects economic reality. It’s important that their currency appreciate more quickly.”

While urging the Chinese to speed up the rates of their reforms, Paulson also recognized that there are steps the U.S. must take as well. “The dialogue goes both ways,” he concluded, emphasizing that the relationship between the two countries is going to be “very important” for a very long time.