A senior Chinese official on Tuesday fended off US pressure for a faster rise in the yuan and bolder economic reforms by telling visiting Treasury Secretary Henry Paulson that China is still poor and poses no threat to anyone.

Vice Premier Wu Yi said at the start of her talks with Paulson that she was happy he had first visited poor Qinghai Province in western China and had seen for himself the big difference with rich cities such as Beijing and Shanghai.

"In making this contrast, you can understand -- who could China threaten? China still has areas as developmentally backward as Qinghai," Wu told Paulson while reporters were in the room.

"China still has 23 million people living in poverty. China's very goal in its development is so that its 1.3 billion people can eat their fill, dress warmly and live well. Who could we threaten? We don't have the ability. China does not and will never threaten anyone."

Her comments went to the heart of Beijing's refusal to permit a more rapid rise in the yuan: officials fear a stronger currency could not only destroy millions of export-orientated jobs but would also make it tough for peasants who make up over 60 percent of its population to compete against cheaper food imports.

Wu said she hoped Paulson's visit to Qinghai would enrich his future testimony to Congress, where feelings are running high.

A bill passed by the US Senate Finance Committee last week -- one of several measures targeting China -- would allow firms to seek anti-dumping duties against countries that have "fundamentally misaligned" currencies.

Paulson made no public comments on Tuesday but expressed concern before he arrived in Beijing about the pending legislation, saying he preferred to secure currency and economic reforms through dialogue.

Yuan Strains

Paulson, who also met central bank governor Zhou Xiaochuan on Tuesday, has said he understands the motivation behind the various bills and why Americans are frustrated by the imbalance in trade with China.

But he told reporters on Monday: "I don't want China to become an increasingly big political issue in the US."

As well as pressing for faster appreciation of the yuan, Paulson has said he will urge China to wean its red-hot economy off exports and permit greater foreign access to the country's financial services sector.

Paulson believes the greater risk for China is that it moves too slowly on reform, not too quickly.

Wu, Paulson's counterpart in this twice-yearly forum, said the latest session in Washington in May had been "very significant in promoting China-US economic and trade relations and overall bilateral ties."

Paulson also stresses the importance of building up long-term relationships with Chinese policy makers. He visited the country some 70 times when he ran investment bank Goldman Sachs and is on his fourth visit in just over a year as Treasury secretary. Despite his courtship of China's leaders, the yuan remains a major irritant in relations.

The currency has risen 9 percent against the dollar in the two years since China stopped pegging it against the US currency. Critics say that is far from enough.

John Frisbie, president of the US-China Business Council, said a revaluation would not be a magic cure because a lot of China's exports to the United States are assembled from imported components.

"The exchange rate is not going to solve the deficit issue," he told reporters in Shanghai.

(China Daily August 1, 2007)