The secretary also urged Chinese regulators to open markets to global competition and participation, which could "improve market practices and infrastructure and enhance financial stability."

Paulson's Shanghai visit came as the Chinese yuan hit a post-revaluation high yesterday amid expectations that the nation's central bank may move faster toward a more flexible exchange-rate system to tackle economic imbalances.

The yuan closed at 7.7395 against the US dollar, the highest since China ended a fixed peg to the greenback in July 2005 and let it move against a basket of currencies.

Paulson suggested yesterday that China's central bank should make its monetary policy more effective by easing its tight exchange-rate regime.

"The combination of a rigid RMB exchange rate regime and large external surpluses means there is a flood of liquidity into the banking system," Paulson said.