Critics in US Congress and some US business leaders claim the yuan is kept undervalued, giving Chinese exporters an unfair advantage. Two key American senators are calling for punitive tariffs on Chinese goods to force a change.

Paulson avoids talking directly about a stronger currency, saying that a more flexible exchange rate is one of several reforms that Washington wants to see.

And he argues that it is in Beijing's own interest to raise the yuan's value. He says that would cut trade surpluses that are straining China's ability to absorb the torrent of money flowing into its economy and boost the value of ordinary families' assets.

In his appearance at Tsinghua, Paulson urged the government to open its financial markets wider to competition. He acknowledged that some Chinese securities firms might be forced out of business, but he said ordinary families would benefit from healthier markets that would create new investment opportunities.

"Investments should be producing 10 percent returns, not 2 percent (that Chinese families earn) on bank deposits," he said.

Paulson told the students that, when he was a young Goldman executive, his wife threatened to leave him if he didn't spend more time with their two children.

He urged the students to make time for family, though he prompted laughter when he admitted that he read bedtime stories to his own children in a high-speed babble so that he could get back to work.

Paulson began his first trip to China as Treasury secretary with a stop in the eastern city of Hangzhou to see a provincial party chief whom he knew from his Goldman days.

Yet even as he tapped old contacts, Paulson was making new ones this week.

On Wednesday, he had lunch at the US Embassy in Beijing with seven Chinese business leaders, including rising stars in the Internet, real estate and insurance industries.

"The key to dealing with China," he said afterward, "is to get access to the right people at all levels."

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