Former U.S. Treasury Secretary Henry Paulson.

To seek common interests through frequent dialogues and contacts while shelving differences is critical to settling trade disputes, former U.S. Treasury Secretary Henry Paulson said Saturday.

Paulson made the remarks in a meeting with Long Yongtu, secretary-general of the Boao Forum for Asia (BFA), in Boao in south China's island province of Hainan.

In this aspect, the U.S.-China Strategic and Economic Dialogue is very important for the two countries to settle trade disputes on the basis of common interests, he said.

It is in China's interests to increase the flexibility of its currency's exchange rate because for government it is an effective policy tool to tame inflation, he said.

Paulson also noted that the United States needs a robust financial regulatory system as the current one built in the wake of the Great Depression in 1930s lags far behind new developments.

The regulatory system needs reforms to prevent some big financial institutions from repeating old mistakes, he added.

Paulson, who was elected a member of BFA's board of directors on Thursday, is attending the forum's annual conference on April 9-11.