Chinese investors study share prices yesterday at a securities firm promoting the Chinese yuan in Beijing.
(TEH ENG KOON/AFP/Getty Images)
BEIJING - For more than a year, US Treasury Secretary Henry Paulson has persuaded congressional critics of China to put off punitive action while he conducts wide-ranging talks with Chinese leaders on economic disputes.
But as he heads into a new round of negotiations next week, Paulson is facing growing pressure to wrest results from a dialogue that has produced few breakthroughs.
US lawmakers frustrated at China's huge trade surplus are drafting punitive measures. Meanwhile, Beijing's support for the contentious talks appears to be waning.
In a sign of China's ambivalence, the Dec. 12-13 meeting takes place at a convention center 45 miles outside Beijing - far from the Great Hall of the People next to Tiananmen Square where talks opened amid fanfare a year ago.
Moreover, Paulson's chief dialogue partner, Chinese Vice Premier Wu Yi, is retiring soon.
"We see a 'dialogue fatigue' on the Chinese side," said James Zimmerman, the president of the American Chamber of Commerce in China.
Few major deals are expected at Paulson's Strategic Economic Dialogue or another meeting on commercial issues the day before, both of which bring together Cabinet officers from the two sides. The governments are expected to sign agreements on helping Chinese exports of food, drugs, and medical devices meet US quality and safety standards, in response to a spate of recalls of China-produced goods and food.
After last year's talks, China ordered four Westinghouse Corp. nuclear reactors.
Even if Beijing makes big-ticket purchases this year, it is not clear that a buying spree would mollify Congress or put a dent in the US trade deficit with China, which hit $232.5 billion last year and is projected to be higher this year.
Once the bedrock of the US-China relationship, economic ties have soured in recent years over disputes on the trade imbalance, the Chinese currency's value, tax subsidies said to favor Chinese businesses, and persisting theft of intellectual property.
Members of Congress who agreed to Paulson's appeal last year to postpone sanctions are at work on measures to punish China, especially if it does not raise the value of its currency, the yuan - which some economists and critics say is undervalued, giving Chinese exporters unfair advantage and driving up the US trade deficit.
"We fully anticipate that the Congress will try to act in the new year," said Myron Brilliant, the vice president for Asia of the US Chamber of Commerce.
One measure sponsored by Senate Finance Committee chairman Max Baucus, a Montana Democrat, and Senator Charles Grassley, an Iowa Republican, would base tariffs in part on the amount by which China's currency is deemed to be undervalued.
The second, proposed by senators Christopher Dodd, a Democrat from Connecticut, and Alabama Republican Richard Shelby, would direct the administration to pursue currency cases before the International Monetary Fund to pressure China.
Aside from currency and trade, also on the agenda for the talks are energy issues, product safety, and Chinese restrictions on foreign investment in China's financial industries.
Analysts say Paulson launched the talks last year mostly to show Congress that Washington was taking action.
A former head of Goldman Sachs & Co. with extensive business contacts in China, Paulson also hoped to buy the Chinese some to time to carry out already planned reforms.
Paulson and other defenders of the dialogue have warned the process will be lengthy.
Even so, Beijing appears to be growing tired of listening to a lengthening litany of American complaints.
When the US ambassador held an annual seminar in October on protecting copyrights, trademarks, and other intellectual property, few Chinese officials showed up, unlike in years past.
The dialogue faces losing further momentum with the expected retirement early next year of Wu, the government's most effective troubleshooter.
Another stalwart of the talks, Commerce Minister Bo Xilai, is also leaving, having been transferred to the provinces.
Chinese leaders recognize they have to offer concessions to protect trade ties, though it is unclear what they can do, said Joseph Cheng, chairman of the City University of Hong Kong's Contemporary China Research Centre.
© Copyright 2007 Globe Newspaper Company.
