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Last Updated: Tuesday, 19 September 2006, 03:08 GMT 04:08 UK
US treasury chief visiting China
By Quentin Sommerville
BBC News, Sanghai

Chinese banknotes
The US is leading the call for the yuan to be more flexible
US Treasury Secretary Henry Paulson has arrived in China on his first visit to the country since taking up the post in July.

Many US politicians believe China's currency, the yuan, is undervalued, and have called for higher import duties on Chinese goods.

However, that is unlikely to receive the backing of Mr Paulson.

The treasury secretary has made clear he will not be looking for any "quick fixes" to China's currency situation.

Mr Paulson is no stranger to China. He has visited here around 70 times in the past 15 years, but this is his first visit since he left his job as chairman of Goldman Sachs bank to become treasury secretary.

Tariff plan

Some politicians and union leaders in the US believe the yuan's value makes China's exports unfairly cheap and costs American jobs.

Two US senators are proposing a 27% tariff on all Chinese goods coming into America.

US Treasury Secretary Henry Paulson
Mr Paulson says he does not want "quick fixes".
However, Mr Paulson has been emphasising the mutually beneficial nature of the Chinese-American trading relationship.

Thanks to that trade, China has the world's largest reserves of foreign currency. But much of it is invested in US government bonds.

And the yuan has been increasing in value, albeit at a slow pace.

The US treasury secretary seems keen to let that process continue without direct American interference.

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