China has announced the right economic policies and can have a soft landing — "level off at a rate of growth that's sustainable" — if Beijing sticks to its script, Treasury Secretary Jack Lew said Thursday.
Lew appeared on CNBC's "Squawk Box" from the World Economic Forum in Davos, Switzerland, with global financial markets experiencing turmoil on plunging oil prices and concerns about an economic slowdown in China.
"The real question for China is a nervousness about will they stick to policies they need to stick to, and are they making policy in a way the world understands," Lew said. "The communication has been uneven. It has not been clear."
"You have to separate some of the movement in the economic indicators from the way they've made policy and announced it," he added, saying the growth picture for the world's second-largest economy was "not that dramatically different" from end of last year.
"I don't think things have changed as dramatically as the sentiment towards China has changed," he said.
In what he said he's learned from frequent dialogue with his counterparts in China, Lew observed: "I think transparency is new to them. And ... being bounced around by markets is new to them."
"These reforms they have to stick to are essentially saying that they'll let their economy be bounced around some and they won't feel the need to act every time it moves," he continued. "I think the sooner they demonstrate that, the sooner they'll build confidence back up."
Lew said he's made it clear to China that currency "devaluations that are designed to gain unfair competitive advantage are unacceptable" and the U.S. will push back.
But currency moves because of a slowing economy are another story, he said. "If they could be clear about what they're doing, I think it would be helpful."
Read More 'Squawk Box' in Davos
On oil, Lew said this is the first time he's heard cheaper oil "described only as a bad thing."
He insisted there are positive aspects as well. "Economic growth in the United states, in spite of headwinds internationally, we're maintaining steady growth, good consumer demand. Lower oil prices are part of the reason for that."
"I don't want to pretend that there aren't downside risks. I follow the downside risks very carefully," Lew said. "If you're in the oil patch, it feels terrible. If you're an oil exporting country, it's very disruptive."
Asked whether he'd support International Monetary Fund Managing Director Christine Lagarde for a second term, Lew stopped short of a formal endorsement. But he did say: "I have a very close working relationship with Christine Lagarde. I have the highest regard for her. I think she's done a great job. I look forward to continuing working with her."
Separately, during a trip to Puerto Rico on Wednesday, Lew said the Obama administration was ready to do all it could to help the debt-ridden territory, but he strongly urged Congress to urgently pass legislation, allowing a debt restructuring.
— Reuters contributed to this report.
