Feb. 7, 2007 (China Knowledge) – China needs to restructure its economy to help trim its huge trade surplus with the U.S., U.S. Treasury Secretary Henry Paulson said.

Paulson said that China must remove its dependency on exports, and that its government must boost domestic demand to help reduce global imbalances of trade and investment.

The Treasury Secretary also said at a hearing before the House Ways and Means Committee that China does not have enough domestic-led consumption, and that a big part of U.S.-China dialogue is to convince the Chinese to move on “the path of reform”.

Through the reforms, Paulson said that China can have an exchange rate that is set in the competitive marketplace in the intermediate term.

"I'm placing a big emphasis on developing capital markets because having a competitive bond market and money market and yield curve and all of these things will make that much more possible," Paulson said.