NEW YORK - CHINA could learn a valuable lesson from the recent problems in the US financial markets and should not see them as reason to turn away from reforms, US Treasury Secretary Henry Paulson said on Tuesday.

Mr Paulson recalled that Washington has worked to help China develop and open up its institutions, in a speech to the National Committee on US-China Relations in New York.

'Some in China look at the recent failures in our financial markets and conclude that they should slow down their reforms', he said.

'But there is a great opportunity for China to learn from our significant mistakes and move forward with reforms that have the potential to produce important gains for China and its people' he said.

For example, Mr Paulson said, a capital markets reform agenda would advance China's economic goals by rebalancing the sources of the country's growth and supporting its transition to a market-driven and innovation-based economy.

He underscored that the United States was working closely with China to combat global financial turmoil that is negatively impacting economies around the world.

The architect of the US$700 billion (S$1.04 trillion) US bank bailout and other extraordinary government interventions in the finance markets hailed China's role in coordinating international efforts to unblock frozen credit.

'It is clear that China accepts its responsibility as a major world economy that will work with the United States and other partners to ensure global economic stability,' Mr Paulson said.

'Addressing the effects of financial market turmoil around the world requires the dramatic steps we are taking here in the United States, and it requires close international corroboration and cooperation,' he added.

Mr Paulson welcomed Chinese Premier Wen Jiabao's recent statement that China will play a constructive and cooperative role in the global emergency efforts.

He also said US officials have been 'in close contact' with Chinese leaders as well as with leaders of other nations.

'Throughout this turbulent time, I have stayed in close touch with Vice Premier Wang Qishan, who has now been appointed to lead China's newly established international financial crisis committee,' the US Treasury chief said.

He called his talks with Mr Wang 'useful and constructive'. On trade and investment, Mr Paulson said it was a source of increased tension between the two countries but cautioned against 'succumbing to the temptation' to make it a 'scapegoat'.

US investors in China and Chinese investors in America have questioned whether the other country is truly open to investment and whether it provides adequate legal protections.

The two countries launched talks in June for a US-China bilateral investment treaty, which Mr Paulson said would help treat each other's investors in a fair and transparent manner.

'US-China relations are more productive today than ever before, largely because we have engaged China as it is, not as we might wish or imagine it to be,' he said.

'We have acted to lessen misperceptions and miscommunication between our countries.' -- AFP