Former U.S. Treasury Secretary Henry Paulson said Tuesday that he was wrongly portrayed in a Financial Times article as claiming China is to blame for the global economic crisis.
"In the years leading up to the crisis, super-abundant savings from fast-growing emerging nations such as China and oil exporters-- at a time of low inflation and booming trade and capital flows -- put downward pressure on yields and risk spread everywhere," the British newspaper quoted Paulson as saying Monday.
That, the newspaper quoted Paulsen, pushed down interest rates and drove investors to riskier assets, sowing the seeds of a global credit bubble that extended beyond the U.S. subprime or high-risk home loan market and eventually burst.
"The Financial Times reporting was wrong," Paulson said in a statement sent to China's Xinhua News Agency Tuesday.
"In assessing the financial market crisis, I have repeatedly and consistently targeted the vast majority of my criticism at problems in the United States, particularly our flawed and outdated regulatory structure," Paulson said.
"Whenever I have commented on global imbalances, it has been against that backdrop and I have gone out of my way to say that no single country is to blame for the imbalances," he added.
Paulson also gave an example -- a speech he made last Nov. 12 -- in which he said: "Over a period of years, persistent and growing global imbalances fueled a dramatic increase in capital flows, low interest rates, excessive risk taking and a global search for return."
"Those excesses cannot be attributed to any single nation," he said. "There is no doubt that low U.S. savings are a significant factor, but the lack of consumption and accumulation of reserves in Asia and oil-exporting countries and structural issues in Europe have also fed the imbalances."
"If we only address particular regulatory issues -- as critical as they are -- without addressing the global imbalances that fueled recent excesses, we will have missed an opportunity to dramatically improve the foundation for global markets and economic vitality going forward," Paulson said in the speech.
In his statement to Xinhua, Paulson said that "the U.S.-China relationship continues to be vital to both our nations and to the global economy."
"To maintain a strong and mutually beneficial relationship, we must rely on direct communication rather than media reports," he said.
(Xinhua News Agency February 5, 2009)