May 10th, 2011
12:18 PM GMT
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Top officials from China and the United States are meeting in Washington this week –- for the third annual Economic and Strategic Dialogue (E&SD). It’s a two-day session for the two powers to speak face-to-face about issues at the heart of their relationship.

But will anything groundbreaking come out of it? If history is any judge (and China has 5,000 years of it), don’t hold your breath. Beijing is in no hurry to rush reforms. Its fear is that sudden moves, as demanded by some hard-line U.S. critics, would destabilize the status quo it knows. Basically, the fear of the unknown is greater than any current fears it feels now.

On Monday, the dialogue started out candidly but fairly positively. In opening remarks, U.S. Treasury Secretary Timothy Geithner outlined the well-known laundry list of bilateral economic issues - but also praised China for its past achievements.

"In China, building on the remarkable reforms of the last 30 years, the challenge is to lay a foundation for a new growth model, driven more by domestic demand, with a flexible exchange rate that moves in response to market forces, with a more open market-based economy."

U.S. Secretary of State Hillary Clinton went even further in her remarks, flatly equating better domestic prosperity to better bilateral ties.

"Some in our country see China's progress as a threat to the United States. Some in China worry that America seeks to constrain China's growth. We reject both those views. We both have much more to gain from cooperation than from conflict. The fact is, that a thriving America is good for China. And a thriving China is good for America."

Still, change will be slowest in the issues of greatest importance.

For example, Daphne Kwok, an HSBC analyst in Hong Kong, told me that critics who want to see a 25% yuan revaluation won’t be happy.

"It's highly unlikely that we will see a sharp one-off (2005-style) appreciation of the RMB, which Beijing ultimately sees as an issue of sovereignty. That said, some meaningful nominal appreciation coinciding with the SED window wouldn't be unheard of."

But that would likely be seen more as a post-dialogue "gift" from the People’s Bank of China than anything else.

As for China’s April trade surplus number which came out today ... well that was just a doozy.

The forecast was for a $3.2 billion surplus. The actual number blew all estimates out of the water: $11.4 billion. That’s the highest so far this year.

HSBC’s Kwok said that could set back China’s leverage in talks this week.

"April's notably wider trade surplus will likely be seized upon by those looking to pressure Beijing into sharply accelerating the RMB's pace of appreciation."

Added pressure yes. But that will not likely turn into reality. To be sure, the yuan has strengthened 5% since last June. Adjusted for rampant inflation hitting the country, that’s actually equal to about a 10% gain. And in the past week the yuan has hit rates not seen since 1993 - today it’s hovering just under the RMB 6.50 mark.

Looking ahead to Tuesday, talks on further yuan revaluation will be of central focus. The argument that the U.S. is now pushing to China: if you let the yuan appreciate more, you’ll be able to tamp down that rocketing inflation -– and keep social unrest, which you fear the most, in check.

soundoff (27 Responses)
  1. FutureofUSChinaTrade

    History is a judge, and serves as a great one in this case. Looking back at all of the economic dialogues and related discussions between the U.S. and China since 1996, it’s amazing to see how very similar policymakers’ talking points have been over the years. Even looking at some of the discussions when the U.S. normalized trade relations with China in 1979 - many of the same complaints, many of the same responses.

    Nevertheless, clear (and very significant) progress has been made. (Both China and the U.S. have, after all, yielded enormous benefits from our 32 years of economic relations.)

    Check out the history of the economic dialogues here:

    May 10, 2011 at 4:39 pm |


    May 10, 2011 at 11:18 pm |
  3. ThatsNotTrue:[

    Well.... for once CNN you're telling the truth, the yuan isn't the problem, it's the overprinting of the American currency among other government corruptions. &&& Why are some people so afraid....once again, the "red scare" argument when they should be focused on education among other things in their own country. And they're only trying to talk down the yuan so they would have to pay less, and maybe weaken the Ahinese economy, remember 1- 2 trillion debt.
    &&& In essence, the government in America have no influence on Chinese matters, they can try to act like the world's police but people inside and outside of the country are realizing it. The talks of improving both countries, well, it's just talk......the US putted a military mothership near China's coast during the fishing island incident with Japan......they left after the Japanese earthquack and tsunami.......and didn't Hillary Cliton made remarks about China steal American jobs and going to war with China will be good for America? ( I DON'T THINK ANYONE IN AMERICA WANTS ANOTHER WAR......POSSIBILY A NUCLEAR ONE).
    The US's government's attitude towards China need to change first, they can help each other.......if the US can stop playing soilder in uncharted territories, threatening them, and stop blaming other people.....since the "communist" government is their second biggest debt owner, next to the federal reserve. If that can change, things can work out, but being hypicrites.........will only earn scorn from other nations and thier own citizens.
    Well, to random blogger, at least you've shown a mutural view of the relationship, and isn't just bashing the country. ^.^ ^.^ ^.^
    I hope you continue with this attitude, insead of the other so called "anti communist" bloggers that have plagued this section and is writing fictional stories instead of real facts. KEEP UP THE UNBIAS VIEWS, THAT'S WHAT REAL JOURNALISM IS ABOUT, EVEN IF IT'S JUST A BLOG!

    May 10, 2011 at 11:24 pm |
  4. james stuart

    Really, what is going to be done? Nothing. I have no trust in these talks anymore, they have been going on for decades but human rights abuses continue on a daily basis. The situation of Tibet is far worse than the 80's and 90's because of talk. Everyone jumped on the "talk and they will listen" band wagon, but the Chinese responded by increasing their military and Navy, threatening their neighbors, locking up murdering more Tibetans in the name of unity (they are a separate people, how can they be in unity).
    I look at how long the Tibetan Government in Exile has been trying to come to some sort of peaceful and amicable resolution, it is almost 60 years now since they Chinese took their land. Look at how peacefully the Dalai Lama has proceeded, only to see his people face cultural genocide, the Chinese have a freak show of a circus going on in Tibet, that is shocking on any scale. Look how the Tibetans put their trust in the world, the U.S., Europe and Australasia, what have they got in return, nothing, zero, ziltch. They are worse off now than they ever were. Meanwhile the west continues to benefit greatly by using China as their factory, but in reality we are dealing with the devil.
    I would like to ask our leaders: What is going on? What concrete actions are going to be taken? All this talk is bringing nothing to Tibet and Xinjiang, and they are not even asking for seperation, just autonomy, with their own internal freedoms as a separate people who own their own lands. It is in no way comparable to Columbus arriving in America, as much as the CCP likens their invasion of Tibet.
    The time for real change has come, if not we are forever doomed to bow to the powers of corruption and deception.

    May 10, 2011 at 11:58 pm |

    America along with a few other civilizations are nearing there end, in some time. Civilizations don't de-industrialize if anything they keep going and going until they just explode. We are at a point after major civilizations were destroyed, and were heading down the same path. China is supposed to rule right now , don't you see ?

    May 11, 2011 at 1:19 am |
  6. Truth about China

    Actually 'Thats not True' while you America Haters blame their currency printing it is merely the same response to what china has always been doing.

    Do you even realise how China artificially devalues its currency?

    Heres how:

    The Chinense government allows more Yuan into the system (basically the same as the US has been doing over the past month).

    This allows the currency to remain devalued.

    Now what to do with all this additional currency???

    Well the problem this causes is known as inflation.

    To solve? They buy US treasury bonds etc as an 'Investment' – effectively reducing the Yuan in their own system by swaping it for US currency.

    This has been working quite well for the Chinese – Until the US got sick of them 'Cheating the System' and merely duplicated what they have been doing: PRINTING MONEY!

    This then causes the chinese 'Investment' to devalue as the US currency depreciates – Thus causing inflation in their own economy.

    So before you spout some BS about how its all america's fault why don't you actually take a look at what China has been doing for the past decade and some.

    America isnt ruining the world economy – THEY ARE TEACHING CHINA IN ECONOMICS THAT HAS BEEN WELL OVERDUE.

    Short term pain for American's to get the export economy that has been ravaged by the cheating chinese back on its feet and LEVEL OUT THE PLAYING FIELD!

    May 11, 2011 at 1:43 am |
  7. NewGBush

    For bilateral talks to be productive, the countries should stick to the relevant topics, in this case economy and security issues. The USA should not waste time interfering in China's domestic issues like the dalai lama nonsense etc. You can't start talks by lecturing the other party as it will result in the other party closing the ears in the best case, and even walking out of the talks if they are not so polite. It is rude to lecture others.

    May 11, 2011 at 3:15 am |
  8. gogol

    Saudi Arabia denounced Bin Laden, refused his support during Gulf War and refused his body after assassination. China on the other hand keeps on supporting Pakistan with money, weapons and nuclear technology.

    Follow the money trail on terror, it will lead you to China.

    May 11, 2011 at 3:16 am |
  9. seppe

    As for pakistan is all a fake story,the real story is that we have 1500 hundred of our best tech.working on nuclear reactors,but on the other side of the mouth ,we disapprove iran nuclear program(HYPOCRITE),as far is china we taught them how to manipulate currency,we voluntarily install all the factory on there land to take advantage of there chip labor, ask the corporate america if they like to tell the thrut about there conniving against there own people? as far of printing money it is a natural process, the more people you put to work the more money is needed to go around,and as far good production,if we were to manufacture sneakers or any other items here in america ,it well o 4 four times more ,and therefore you well be paying 4 four time more , the same gous the oil here in america it well cost 12 twelve dollars a gallon ,if we were to use our on reserve ,again as of printing money we do it to make the bank /wall street/the corporate more wealthy and the military to play with there toys and the life of others like a game .and as far as the culture and history,we in the west,started with 5000 thousands of year experience(which it means that the glass was half way full of knolage we just follow the lead that they have started and in some cases we did well but in maaaaany cases we just screwit in very big way,so we actually have 7 seven thousand of years of civilization ,and we have killed more people and fought more wars that the entire east,i can go on and on on this for a long time,if any of you out there cares to talk with me feel free to do so ,i will be very happy to update you at any issue,in a constructive way that is.

    May 11, 2011 at 12:39 pm |
  10. seppe

    As per american people being simple,yes they are pathetically simple ,the few think that they care about is,oil to fill there 350 horse power cars,legalize marijuana,keep the supply of dope coming at any price (look at the mexico usa border)keep the wars going on in the name of religion,and blame some one else for there stupidity,in the mean time the wealthy are feeding the masses with the the propaganda of distraction,like the rape of that Libyan women (which i am sorry and tired of it) ,the transgression of the hollywood specimens,(ho gives s...t about) we have a situation were the mass of american workers are two 2 pay check away from bankruptcy,is this simply enough for you??.

    May 11, 2011 at 1:09 pm |
  11. cmmrc

    What they are buying, we aren’t selling. What we are selling, they aren’t buying.

    May 11, 2011 at 2:50 pm |
  12. Btrends

    Well....China is a really important issue, US should act wisely . A long term dialogue may come up with positive results.

    May 11, 2011 at 8:23 pm |
  13. Btrends

    US should immediately stop selling chinese products.

    May 11, 2011 at 8:25 pm |
  14. Btrends

    Chinese products are always of low quality and harmful by nature.

    May 11, 2011 at 8:27 pm |
  15. ThatsNotTrue:[

    America isnt ruining the world economy – THEY ARE TEACHING CHINA IN ECONOMICS THAT HAS BEEN WELL OVERDUE.

    Short term pain for American's to get the export economy that has been ravaged by the cheating chinese back on its feet and LEVEL OUT THE PLAYING FIELD!

    &&& The only thing the US government is teaching the world is what full corruption looks like, they got no economic playing field now because they invest solely into wars, now they're just upset that other people are beating them at their own game.
    &&& Might I remind you that China's not the only economy that is supassing the US's, and not the only country the US owns debt to. You can looked it up, they even got a chart for it, they HAVE REASON to try and DROWN the USD since at least their debt will be smaller, so stop pointing fingers, the Chinese currency always have been 7 or 6:1 American dollar, and why even bother with a booming economy??? As shown with the facts in atricle, the US way is NOT ALWAYS the International way, we don't shoot them first then ask them questions, or in this case, accuse them first before finding out the real facts.

    May 11, 2011 at 10:29 pm |
  16. Hi

    Sunday Telegraph in 2008 by Madam Fu Ying who said that many Western people still use the term Mount Everest to refer to the highest mountain peak in Tibet and believe George Everest was the one who discovered the peak and the first person to measure it. She said that what they may not know is that the authorities of the Qing Dynasty in China in the early 18th century twice sent teams to measure the height of the mountain peak more than a hundred years earlier than Everest and the mountainalready had the beautiful Tibetan name Qomulangma *long before Everest's grandfather was born*
    Almost every foreign reporter allowed to ask a question raised Tibet, drawing an audible groan from the large audience of mostly Chinese journalists and officials at the press conference.
    To cut the story short .. the issue of sovereignty goes beyond support for the party and touches the core of national identity. To suggest to most Chinese that Tibet should be independent from China is like telling an American that Texas should secede from the Union.
    A profanity laced video posted on YouTube, the video-sharing website, entitiled *Tibet Was ,is and always will be a part of China* angrily tells viewers that China will not leave Tibet until all Europeans leave Canada, New Zealand, Australia and the US returns it to *the natives* (Red Indians) etc.

    Any way, I am not Chinese but I think we must be fair and so harmoney will be in this world and so we can live our happy life

    Some Chinese said that the Chinese Government treats Tibetan and Xinjan people better than the Han Chinese e.g. they can have as many children as they wish whereas the Han Chinese only allow one child.

    Let's hope we all find out the truth and get justice mutually
    If the world economy is a huge issue than look at the BANK and it's MANAGEMENT is a great concern to my best of knowlege...

    May 13, 2011 at 11:18 pm |
  17. jamiei

    The difference between Americans and Chinese & their media is:

    Chinese know their news is full lies and propaganda and thus actively look for news and information abroad, balancing their viewpoints and perspectives.

    Americans on the other think their news 'objective' and 'balance' when they are infact being brainwashed. Particularly ppl who sole rely upon mainstream sources which value "sensationalism over substance".

    May 23, 2011 at 9:41 pm |
  18. thunder

    I think we should hold a proper view on it. Only through cooperation can we benefit from it.

    May 28, 2011 at 4:23 pm |
  19. stonecai

    The difference between Americans and Chinese & their media is:

    Chinese know their news is full lies and propaganda and thus actively look for news and information abroad, balancing their viewpoints and perspectives.

    Americans on the other think their news 'objective' and 'balance' when they are infact being brainwashed. Particularly ppl who sole rely upon mainstream sources which value "sensationalism over substance".


    but in fact, CNN is more negative about China than other US media

    June 3, 2011 at 12:49 am |
  20. alexstorm

    it seems that many stupid guys were misled by the rubbish" mainstream media". u guys are really pathetic. but let me tell you the truth, China is the greatest country of the world under the leadership of CPC, where people are enjoying a happy life and much freedom.

    June 3, 2011 at 3:17 am |
  21. Pacific

    China cheats all the world, by this way, China keeps growing. On the other hand, china's government is a brutal one!!! Take care with china!

    June 11, 2011 at 8:32 pm |
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