Tres Sec Paulson replys to Hillary

From "This Week" with George Stephanopoulos on ABC

Excerpt on Markets/China

STEPHANOPOULOS: One of the other factors that people have cited, in this market blip on Tuesday — Senator Clinton said it was an alarm bell about the amount of foreign debt held by China and other nations.

How big a concern is that to you?

PAULSON: George, I've spent my time looking at global capital markets. I've spent a lot of time, over my career. I think I know something about global bond markets. I've watched government bond market deliver — develop globally. And as I've worked with issuers, I always tell them it's in their best interest to have as much demand as possible; to have it be global demand, a diversity of demand.

And as I look at the demand for U.S. treasuries, I'm very pleased to see demand from all around the world; from governments, from individuals — I see that as a very positive thing.

Now, when we look at, let's take China or Japan. In China, there's a fair amount of holdings of U.S. treasuries by the government and by other individuals.

But all the Chinese holdings are not greater than the amount of Treasuries that trade in a single day in the U.S. That's how much diversity we have in our holdings.

So, to me, the key thing — it's a positive that foreign investors want to own our treasuries. Interest rates are lower, it's helping our economic growth in this country. The key thing is to keep our economy growing, to have it to continue to be the best economy in the world so foreigners will want to invest here.

And I see that as…

STEPHANOPOULOS: But isn't the flip side, though, that they're holding our economic state in their hands?

PAULSON: Well, I tell you, I don't look at it that way. We're holding our economic fate in our own hands. And if we keep this economy competitive and growing, they're going to invest here.

And let me also tell you there's great diversity. When people talk about foreign holdings, as I said, Japan is the largest holder.

If we look at all of the entities, all of the individuals, the government holdings out of Japan — you know, all of those holdings are a little bit more than the treasuries traded in one day in the U.S. A little bit more than one day.

In China, it's lees than one day. We've got great diversity in the holdings of our treasury securities, and we should be very pleased with that.

STEPHANOPOULOS: But doesn't it make it more difficult, because China and Japan together, I think, hold about $1 trillion of our debt. Doesn't it make it more difficult to negotiate with them when they're our banker?

PAULSON: I don't see it that way. The $1 trillion, we trade $500 billion a day in U.S. treasuries. That's two-days' trading in U.S. treasuries. And, and again, that's held by multiple entities in both of those countries. I look at it and say, as long as our economy is growing and we don't have enough savings to support that growth, we can be very pleased that foreign investors want to invest in our economy, have confidence in our economy, and they come to the U.S. to make their investments.

STEPHANOPOULOS: You probably know as much or more about China than any other American. You've been there more than 70 times, you're heading there again this week. How are we supposed to think about China?

Read on here ABC News: Sec. Henry Paulson: The Complete Interview