US to meet China in Washington to tackle thorny issues

Top US and Chinese officials will be meeting for two days in Washington, starting this Monday.

The heads of 16 US government agencies and representatives from 20 Chinese government departments will discuss the most difficult issues in a complex, interdependent relationship.

The annual Strategic and Economic Dialogue comes just four months after bilateral discussions between President Barack Obama and President Hu Jintao.

It is not thought any concrete results will emerge from this meeting - rather, each side is hoping to influence the other's point of view.

That has meant a string of statements and briefings on issues from the yuan exchange rate to protectionism, America's budget deficit and China's human rights record from leaders on both sides.

Perhaps the most influential business group in America, the US Chamber of Commerce, says it is most worried about reduced access for American businesses to China's vast market.

According to Myron Brilliant, senior vice-president for international affairs: "It is more difficult to do business in China than it was five years ago."

In particular, the chamber says China's "indigenous innovation" policy tilts the playing-field in favour of Chinese firms, and hurts American businesses.

US Commerce Secretary Gary Locke said ahead of the US-Chinese meeting that US firms in China "are frequently shut out of sectors or forced to share their technology to gain market access".

Chinese wall?

But China makes its own claims of discrimination. Beijing argues the US imposes restrictions on Chinese investment in the US using the cloak of national security concerns.

China expert Professor Shang-Jin Wei, of Columbia University in New York, says both countries are more open to trade and investment than the rest of the world.

But sizeable disagreements over important issues remain.

US Treasury Secretary Timothy Geithner will be co-chairing the economic talks with China's Vice Premier Wang Qishan, while Secretary of State Hillary Clinton and State Councillor Dai Bingguo will head the strategic dialogue.

Mr Geithner has said he will press China again on its currency policy, an issue of persistent friction between the world's two biggest economies.

The Chinese have retorted they are adamant that pleas to raise the value of the yuan will be of little use.

Chinese Vice Finance Minister Zhu Guangyao said in a briefing ahead of these talks that both countries agreed on the direction of yuan reform, even if they disagreed on the pace of change.

America has complained for years that China keeps its currency artificially low, to help Chinese exporters.

Many US lawmakers believe the yuan is undervalued by 15% to 40%.

The yuan has now risen in value by about 5% since June.

Trade issues

But the US wants the Chinese currency to increase further, not least because of the worrying trade gap between the two nations.

On the other hand, China has its sights set on America's huge budget deficit.

China is America's biggest lender and Beijing has asked Washington on numerous occasions to offer assurances about government debt levels and the strength of the dollar.

The federal deficit in America is expected to hit a staggering $1.4 trillion this year.

That is a serious concern to governments like China that invest heavily in US Treasury bonds and other dollar assets.

Finally, talks will not just be about business.

The Obama administration says it will raise China's human rights record at this event following recent bilateral talks that produced no tangible results.

Critics have argued the treatment of dissidents and individual rights in China has been lost amidst the trade and business talk.