- The Washington Times - Wednesday, September 20, 2006

2:08 p.m.

BEIJING (AP) — The United States and China are starting a high-level economic dialogue meant to repair relations soured by trade tensions, U.S. Treasury Secretary Henry Paulson and a Chinese leader said today.

The discussions will deal with long-range and big-picture issues that affect the U.S. and China, Mr. Paulson and Chinese Vice Premier Wu Yi said in announcing the arrangement on the first day of Mr. Paulson’s visit to Beijing.

Relations between the countries, once buoyed by robust trade, have deteriorated in recent years as China’s trade surplus rockets higher and critics in Washington accuse Beijing of keeping its currency undervalued to make Chinese exports cheaper. Washington also wants Chinese help in restarting suspended world trade talks.

Neither Mr. Paulson nor Mr. Wu said whether the currency or the trade gap would be addressed in the dialogue. A Treasury Department statement said the U.S. would continue to press Beijing over those issues as well as China’s need for better protection of intellectual property.

Mr. Paulson suggested that the dialogue should put economic relations in a new perspective.

“As global economic leaders, we share responsibility to maintain open markets at home and promote free and fair trade in all countries,” Mr. Paulson told reporters in Beijing’s Great Hall of the People. The dialogue “reflects the 21st-century global economy and redefines the economic relationship between the United States and China.”

Such talk likely was well-received in Beijing, which wants to be treated as an equal partner by Washington, and was in keeping with a new tone Mr. Paulson has sought to inject in U.S.-China relations. The Bush administration’s frequent use of public pressure in the past few years produced only marginal changes in Chinese policy on trade and the currency.

Mr. Paulson dismissed the possibility of breakthroughs on the currency or trade disputes on this trip. He said its goal was the creation of a new dialogue with a “better, more productive tone.”

“I don’t think I gave anybody any impression that I would make my first trip to China [as Treasury secretary] and come home with a solution to long-term problems,” he said at a news conference after meeting Mr. Wu. “I never expected anything other than a first set of discussions.”

Though making his first trip as Treasury secretary, Mr. Paulson visited China dozens of times as chairman of the investment bank Goldman Sachs, building extensive ties in Chinese business and political circles.

At the start of their meeting, Mr. Wu praised Mr. Paulson, saying that he “understands even more about China than many Chinese people” and calling him a “true friend of China.”

Mr. Paulson, while cordial, emphasized his commitment to addressing the thornier issues of China-U.S. trade relations in his new role.

“Because of the time that I have spent in China, I have learned how many common interests we have, how many interests we share, and I’ve also learned that some of the tensions that exist are also important and that it’s very important that we find solutions to them,” Mr. Paulson said.

In keeping with his emphasis on personal contacts, the secretary had lunch at the U.S. Embassy with a group of Chinese business executives that included rising stars in the Internet, real estate and insurance industries.

As Mr. Paulson began his rounds in Beijing, a U.S. business group criticized new Chinese regulations that limit foreign news agencies’ access to the Chinese market, saying they could impede the flow of information to Chinese banks and financial firms.

The regulations, issued last week, give the state-run Xinhua News Agency control over the distribution of foreign news agencies’ text, photos, financial and other information services.

Letting Xinhua regulate its competitors “wholly undermines China’s stated aim of creating a ‘level playing field’ for news media in China,” the American Chamber of Commerce in China said.

Aside from the meeting with Mr. Wu, who was joined by Finance Minister Jin Renqing, Mr. Paulson was scheduled to meet other economic decision-makers as well as President Hu Jintao.

Exchange rate reform is among steps that Washington wants China to take to cut its trade gap with the United States, which last year reached $202 billion and is expected to top that this year. Mr. Paulson, however, has said that he expects such reforms to take time.

Chinese leaders say they eventually will let the currency, the yuan, trade freely on world markets. However, they say doing so immediately would cause economic turmoil, harming China’s fragile banks and financial industries.

Under U.S. and other pressure, Beijing revalued the yuan 2.1 percent against the dollar 14 months ago but has allowed the currency to rise in value only another 2.2 percent since then, even as the dollar has sunk against most major currencies.

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