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WASHINGTON: The United States is expected to prod China to step up economic and financial reforms during high-level dialogue this week where Chinese trade and currency practices will come under scrutiny.
US Treasury Secretary Henry Paulson and Chinese Vice Premier Wu Yi will lead about a dozen of their ministers in the two-day "strategic economic dialogue" beginning Tuesday aimed at addressing mostly long-term issues facing the world's richest and most populous nations.
The Washington meeting comes amid increasing pressure from US lawmakers for action by Beijing to address a snowballing US trade deficit with China that hit US$232 billion last year, blamed on an undervalued yuan currency.
Ahead of the talks, a bipartisan group of 42 legislators has filed a petition to the administration of President George W. Bush calling for action against what they call Chinas "unfair currency manipulation."
Lawmakers also raised the ominous prospect of pushing ahead with legislation imposing sanctions on Beijing over the currency woes if the Chinese refuse to make their currency more flexible.
They accuse the Chinese government of keeping its currency artificially low to give its exporters an unfair advantage.
But the Chinese leaders are unlikely to take the criticism lying down.
The tough-talking Wu Yi is to hold a rare meeting with Congressional leaders to address the trade and currency concerns head-on, officials said.
"There are some in the US who overstate the US trade imbalances with China ... some even advocate trade protectionism," Wu Yi said in an opinion piece in the Wall Street Journal ahead of the meeting. "Attempts to politicise trade issues should be resisted," she said.
Despite the noise and heated debates, Wu's visit could still be one of quiet cooperation.
"Though raising a cry about Chinese trade and currency practices is politically expedient for Congress, even Congress is quietly satisfied with gradual, rather than rapid, change - something easier to manage on both sides of the Pacific," said Stratfor, a leading security consulting intelligence agency, in a report ahead of the talks.
In an apparent bid to counter foreign criticism of its exchange rate and also to rein in runaway economic growth, Beijing decided last week to widen the trading band of the yuan and raise interest rates.
But it did little to calm US concerns.
While it is a "useful action," Beijing should use the wider band to allow greater currency flexibility, said the US Treasury's special envoy for China, Alan Holmer.
A major facet of the Washington talks is to determine how China could meet its goal of "rebalancing" its economy so that domestic consumption - rather than exports and investments - could become a key growth driver, Holmer said.
"This requires greater currency flexibility in the short term and moving to a market determined exchange rate in the medium term," he said.
"Rebalancing the Chinese economy towards consumption will raise the welfare of the Chinese people and allow China to grow in the future without generating huge trade surpluses," he said.
The dialogue is the second since Bush and his Chinese counterpart, Hu Jintao, decided in September 2006 to launch the forum to grapple with critical issues that extend across multiple agencies and departments of the two nations.
Among other areas to be discussed at the meeting are structural reforms in both financial services and non-financial services with plans to increase access to each others markets in air cargo and passenger travel.
Joint collaboration on improving energy efficiency and sharing technologies as well as moves to enforce intellectual property rights are other key topics.
- AFP/yy
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