U.S. Treasury Secretary Henry Paulson said on Friday that recent financial market volatility does not necessarily reflect the fundamentals of the U.S. economy, nor those of the developing Chinese economy.
In an interview with National Public Radio, Paulson said despite weakness in manufacturing and housing, the U.S. economy was strong, with low unemployment and strengthening exports.
Asked whether this week's stock market declines indicated more volatility and risks in the U.S. economy, Paulson said: "For at least as long as I have been looking at markets, there is volatility in markets.
"Markets at any one time don't necessarily reflect the economic fundamentals in markets -- certainly you don't move in a straight line one way or the other forever. So as long as you have markets, you're going to have volatility," Paulson said.
He said capital markets in China, where a big drop in Shanghai stocks this week sent shudders around the world, also "are not yet very reflective of their overall economy. Their economy is still developing."
Paulson said the United States was "really pressing" China to move forward with financial market reforms to enable markets to determine the valuation of the yuan currency.
"We would like their currency to appreciate. We would like it to more adequately reflect the economic fundamentals," he said.
As China's financial markets develop and are opened to more competition, they will develop a stronger institutional sector, which will help to reduce market volatility, he said.