By Denis McMahon and Liu Li
Of DOW JONES NEWSWIRES
BEIJING -(Dow Jones)- China and the U.S. opened the fifth round of high-level strategic economic talks in Beijing Thursday, but the transition in the U.S. government make it close to certain that the discussions won't yield breakthrough agreements on issues such as currency reform.
U.S. President-elect Barack Obama hasn't said whether he will continue the semiannual Strategic Economic Dialogue, which was conceived by U.S. Treasury Secretary Henry Paulson.
In opening comments Paulson said the current two-day meeting will likely deliver agreements on energy and environmental sustainability. But he made no reference to the recent depreciation of the yuan, or comment on the financial sector beyond broader references to investment.
During Thursday's meetings, senior Chinese officials underscored Beijing's concerns about China's investments in the U.S., repeated calls for the U.S. to correct its own imbalances, and stressed a mutual commitment to opposing protectionism.
People's Bank of China Gov. Zhou Xiaochuan left for the U.S. soon after giving his morning speech at the SED. He will attend the Group of 30 meeting in the U.S. being hosted by Timothy Geithner, Obama's nominee for Treasury Secretary.
According to a person at the international department of the PBOC who declined to be named, Zhou will attend the G30 meeting in New York from Dec. 4-6.
While the PBOC official said it was unclear whether Zhou would meet Geithner, the G30 is being hosted by Geithner in his current capacity as the president of the Federal Reserve Bank of New York.
Larry Summers and Paul Volcker are also members of the group, a private, nonprofit international body composed of very senior representatives of the private and public sectors and academia.
Obama has named Summers as director of the National Economic Council and appointed Volcker, a former Federal Reserve chairman, to head a new White House advisory board tasked with helping to lift the nation out of recession and stabilize financial markets.
Asked whether Zhou's departure diluted the significance of the SED, U.S. Trade Representative Susan Schwab, part of the delegation traveling with Paulson, said "absolutely not."
Little Comment On Yuan Trend
Currency reform has been a key issue of the SED agenda from the start. A senior U.S. government official, speaking on condition of anonymity, said there has been progress on a real and nominal basis on the yuan, but stopped short of discussing a view on the recent reversal in the yuan's direction, possibly indicating the difficulty in making headway on the currency issue under a lame-duck administration.
China's yuan has hit the lower limit of its daily trading band against the dollar every day since Monday after the PBOC abruptly moved its daily reference rate for the currency toward a weaker yuan at the start of the week.
In each daily trading session, the PBOC allows the dollar-yuan spot rate to move no more than 0.5% above or below the central parity rate.
Chen Deming, China's minister of commerce, said the recent drop in the yuan was due to "purely market forces," adding it wasn't a measure to support the country's flailing exporters.
China's currency reform is "progressive and should be controllable," he said. "This principle has never changed."
Schwab said it was in China's own interest to avoid pursuing any course of action that might aggravate swelling protectionist sentiment around the globe.
"I came away (from SED discussions) with the clear sense that China's leaders and ministers recognized the downside risk of policies...that would lead to a downward spiral of protectionism," she said.
Meanwhile, the PBOC's Zhou said China should use the global financial crisis as an opportunity to rebalance its economy in favour of stimulating domestic demand.
"Against the background of a deteriorating economic crisis, China should not just tackle economic problems, but restructure its development model," he said.
In his speech at the SED, Zhou said the U.S. should consider the impact of its policies on the world. He also called on the U.S. to deal with its economic imbalances by boosting savings as well as narrowing its fiscal and trade deficits, according to Jin Qi, a PBOC official who briefed reporters on the speech made in closed-door meetings.
On the Chinese economy, Zhou said in his speech Beijing will step up its risk controls over outward investments and is confident of ensuring steady economic growth and financial stability.
But as China is the largest holder of U.S. Treasurys, Beijing also indicated its desire for the U.S. to safeguard its investments.
"(China) hopes the U.S. can take all necessary measures to stabilize its economy and the financial market to ensure the security of China's assets and investment in the U.S.," said China Vice Premier Wang Qishan.
-By Denis McMahon and Liu Li, Dow Jones Newswires; 8610 6588-5848; denis.mcmahon@dowjones.com
(Juan Chen and Terence Poon contributed to this story.)
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(END) Dow Jones Newswires
December 04, 2008 07:09 ET (12:09 GMT)

Publié le 04 Décembre 2008 Copyright © 2008 Dowjones