Reply #38: US cranks up the decibels while China plays it cool [View All]

[Ghost Dog]

http://www.ft.com/cms/s/695fdc82-8985-11db-a876-0000779e2340.html
By Krishna Guha and Richard McGregor
Published: December 12 2006 02:00

For a forum meant to allow Washington and Beijing quietly to sort out long-term problems, the run-up to the first US-China Strategic Economic Dialogue starting on Thursday has already featured some traditional high-decibel diplomacy.

In recent days Hank Paulson, the US Treasury secretary, and Susan Schwab, the US trade representative, have both made statements admonishing China over its trade, economic and currency policies.

The Chinese have so far been much more restrained, in public at least. "This is a very important strategic dialogue and probably it's good for policy co-ordination and also for trade imbalances and many other issues," said Zhou Xiaochuan, the governor of the People's Bank of China, the central bank, in Beijing yesterday. "I think that Hank Paulson raised the requirement to have an economic dialogue. We are prepared to give a very positive and active response to that."

Despite the tenor of some of the US statements, the planned twice-yearly dialogue, as presently structured, will not be anything like a bilateral trade negotiation. Just the size of the US delegation, which includes seven cabinet-level officials and Ben Bernanke, the chairman of the Federal Reserve, makes this encounter different. US officials have been scratching their heads ahead of the meeting, wondering whether Washington has ever sent such a senior delegation to bilateral talks in recent memory.

The format, too, is distinct. Rather than splitting into multiple meetings, both the US and Chinese delegations will sit together in a single meeting room for 1½ days. Both sides will make seminar-like presentations on a range of issues, with the central focus on global imbalances and the Chinese economic growth model.

The US delegation is then scheduled to meet Hu Jintao and Wen Jiabao, the president and premier respectively, while Mr Bernanke makes a speech to a Beijing think-tank.

The dialogue has been established to oversee a large and complex relationship, simultaneously underpinned and undermined by swelling trade ties, with a huge and growing surplus in China's favour. "Overall, the relationship is good, probably better than it has been for some time," said Shi Yinhong, of People's University in Beijing. "But Chinese leaders understand that pressure is accumulating over economic issues."

Mr Shi said he expected China to stick to the "old strategy" in defusing tensions for the moment, "making some concessions, changing some behaviour, but resisting what in Chinese eyes are excessive demands".

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