2 May 2012 Last updated at 23:09 ET

Timothy Geithner calls for China to alter growth policy

Mr Geithner has often voiced his concerns over China's economic policies

US Treasury Secretary Timothy Geithner has urged China to change its export-led growth policy and focus on increasing domestic consumption.

Mr Geithner said that such a shift was necessary to sustain China's economic growth in the future.

China, the world's second-largest economy, relies heavily on its exports for growth.

However, a slowdown in key markets such as the US and Europe has raised fears about China's growth prospects.

"In China, you are in the process of exploring the next frontier of economic reforms, recognizing as your predecessors did more than 30 years ago, that future economic growth will require another fundamental shift in economic policy," Mr Geithner said at the opening of the annual US-China talks in Beijing.

"The United States has a strong interest in the success of these reforms, as does the rest of the world."

Yuan appreciation

Mr Geithner also called for China to allow further appreciation of its currency.

The value of the yuan has been a big point of contention between the world's two biggest economies.

The currency has risen almost 8% against the US dollar in the past two years, but US policymakers argue that it is still undervalued.

They have often accused Beijing to keeping the value of its currency artificially low to help its exporters, saying that such a move gives Chinese businesses an unfair advantage and hurts US firms and its economy.

For its part, China has been looking to loosen its control over the currency, but has said that a sudden appreciation of the yuan will not only hurt its exporters but also have a negative impact on its overall economy.

Last month, Beijing said it will allow the yuan to fluctuate up to 1% in trading against the US dollar from a fixed price set by the central bank, up from the previous limit of 0.5%.

However, Mr Geithner said that a stronger currency "will help reinforce China's reform objectives" and encourage domestic demand.

"It will provide China the independence and flexibility to respond to future changes in growth and inflation," he added.