US Treasury Secretary Henry Paulson urged China to drop tariffs on environmental equipment, saying trade barriers are hindering efforts to clean up a nation that has 16 of the world's 20 most polluted cities. “There's something that doesn't seem economically sensible and morally right'' about charging a tariff on clean technology, Paulson said after his speech on Thursday on energy and the environment at the Chinese Academy of Sciences in Beijing. Heavy industry has fueled China's 9.4 percent average growth over the past decade, polluting the nation's rivers, soil and air. Paulson leaves Beijing Thursday night after a two-day visit to meet leaders newly appointed to the nation's cabinet and to prepare for bilateral talks on economics and trade in June. “In China, I hear from government officials about the need for US technology to help clean up China's rivers and control pollution from China's many smoke stacks, but that technology can be expensive in part due to tariffs and non-tariff barriers,'' Paulson said in the speech. “We have a shared interest in resolving these dilemmas, and we can solve them.'' Paulson said imported water membrane technology could help to reduce river pollution from power plants. China's commerce ministry declined to respond to Paulson's comments. The count of most-polluted cities is the World Bank's. The criticism may be “a way to make some noise'' to suggest to the US Congress that Paulson isn't soft on China, said David Cohen, an economist at Action Economics in Singapore. Some US lawmakers advocate legislation to force China to let its currency appreciate more quickly. Paulson “has always been one to counsel patient diplomacy,'' Cohen said. Paulson said that China and the US, the world's two biggest emitters of greenhouse gases, must work together to reduce their dependency on oil and increase energy security. The nations signed an agreement in December to ensure imports and exports meet environmental protection laws and pledged to cooperate to promote alternative fuel technologies for automobiles. Since then, the two countries have been fleshing out the accord, Paulson said. Paulson praised China's efforts to reduce energy consumption as a percentage of GDP, while saying more must be done. He urged China to lift price controls on electricity and fuel that upset “the natural equilibrium of markets to match supply and demand.'' The US this week rejected a Chinese proposal for developed countries to contribute a percentage of their gross domestic product to offset the impact of climate change. During his visit, Paulson has met with leaders including President Hu Jintao and discussed topics ranging from China's crackdown in Tibet to the currency. The yuan has advanced 4 percent versus the dollar since the beginning of the year - after a 7 percent gain in 2007 - and is up 18 percent since the Chinese abandoned a fixed exchange rate in July 2005. “Although the process of adjustment is not complete, the accelerated pace of appreciation is significant and welcome, and should continue,'' Paulson said in his speech. “China's economy is so large and complex that it's dangerous if you don't have a renminbi that reflects underlying fundamentals,'' he told reporters later. The yuan is a denomination of the renminbi. Manufacturers in the US and Europe say a weak currency gives China an unfair trading advantage by making products cheaper. Paulson said that some job losses will result in China from a stronger Chinese currency. The yuan closed at 7.0158 versus the dollar in Shanghai from 7.0184 on Wednesday. Paulson declined to comment on Federal Reserve Chairman Ben S. Bernanke's statements yesterday that the US economy may shrink in the first half of the year, and that a recession is possible. Billionaire George Soros yesterday called the US financial crisis the worst since the Great Depression. “There is no doubt that we're having a tough quarter, that the economy has turned down sharply,'' Paulson said. While China's leaders are closely watching the US turmoil to gauge its impacts on both countries, the Asian nation must continue to move toward a market economy, the Treasury secretary said. “I think the biggest threat to more reform in China is domestic industry that doesn't want more competition,'' Paulson said. China's economy grew 11.2 percent in the fourth quarter of last year and was the biggest contributor to global growth in 2007, according to International Monetary Fund estimates. __
