Paulson Says Global Economy Is Strong

SEOUL, South Korea -- U.S. Treasury Secretary Henry Paulson expressed confidence Wednesday in the global economy, calling it strong and characterized by low inflation.

"We have a very strong global economy," Paulson told reporters after meeting South Korean Finance Minister Kwon O-kyu. "We have a global economy with low inflation, high levels of liquidity and I feel very comfortable with the global economy."

Paulson made the remarks when asked if he thought the worst of the recent global stock sell-off was over after markets worldwide, including in the United States, rose Tuesday.

The former chief executive of investment bank Goldman Sachs, in the middle of a three-nation Asian tour, arrived in South Korea late Tuesday from Japan and left midday Wednesday for China.

On Tuesday in Tokyo, Paulson said that the global economy is as strong as he's ever seen it and that reforms in China would help lessen the kind of market volatility that has recently rocked international stock markets.

Asian markets were mixed Wednesday after rebounding Tuesday. Stocks in Tokyo and Hong Kong slipped back, while markets in Australia, South Korea, Taiwan and the Philippines rose. On Wall Street Tuesday, the Dow Jones industrial average rose 157.18, or 1.30 percent, to 12,207.59, after dropping 581 points over the past week.

In Seoul, Paulson also held talks with Trade Minister Kim Hyun-chong and President Roh Moo-hyun, who told Paulson that South Koreans can't forget the role played by the U.S. Treasury during the 1997 South Korean financial crisis.

"The way that this country has responded and come back has just been a model for the whole world," Paulson said in response.

South Korea was one of the countries hardest hit by the the regional financial crisis that struck a decade ago. With the aid of an international bailout package, it quickly recoverd by reforming its heavily indebted family-owned conglomerates, streamlining its banking sector and improving the transparency of its corporations.

During the brief stop in South Korea, his first since becoming treasury secretary in July, Paulson also discussed efforts by the United States and South Korea to conclude an ambitious free trade agreement.

In opening remarks with Kwon, Paulson lauded the relationship between the two countries.

"We're very, very pleased with our relationship with your country," Paulson said, adding that he was looking forward to discussing the proposed free trade deal.

South Korea's Ministry of Finance and Economy said in a statement after the meeting that Paulson and Kwon agreed that their governments would "actively cooperate" to conclude the free trade agreement.

Free trade negotiators for the two sides plan to meet in Seoul for five days from Thursday in an attempt to conclude an agreement by the end of this month. If successful, it would be the biggest such deal for Washington since the North American Free Trade Agreement in 1993.

South Korea and the United States did $72 billion in trade in 2005, making the Northeast Asian country the U.S.'s seventh-largest trading partner.

According to the ministry statement, Paulson and Kwon also said that the "foundation of the global economy remains solid" despite the recent turmoil in global stock prices.

Paulson, meanwhile, told Kwon that the U.S. economy remains on a stable growth path despite sluggishness in the U.S. housing market, the statement said.