China-US economic talks underway

Two days of high-level economic talks between the US and China have opened in Beijing with criticism on both sides.

Chinese Vice Premier Wu Yi said in her opening remarks that the US was failing to fully understand China.

Meanwhile, US Treasury Secretary Henry Paulson accused the Chinese of holding down the value of their currency, the yuan, to boost exports.

America had a record trade deficit with China last year of more than $200 billion (o101bn). Mr Paulson played down the prospects of progress in the talks but the Chinese Vice Premier, Wu Yi, said she was optimistic that they would enhance mutual trust and remove misgivings.

Bilateral relations

"We have had the genuine feeling that some American friends are not only having limited knowledge of, but harbouring much misunderstanding about the reality in China," Ms Wu told Mr Paulson and other senior officials. "This is not conducive to the sound development of our bilateral relations," she added.

The summit, which is being billed as a "strategic economic dialogue", follows a range of commercial deals signed between the US and China.

Key topics include currencies, access to markets and information piracy. This week marks five years since China joined the World Trade Organization, but the US feels China still has much to do to open its markets as required. The delegation in Beijing includes the Federal Reserve's head Ben Bernanke and US Trade Representative Susan Schwab.

The visit comes days after the US issued a report assessing China's record in implementing requirements demanded by the WTO.

"China has taken many important steps to implement its WTO obligations, but on the fifth anniversary of its WTO membership, China's overall record is decidedly mixed," said Susan Schwab following the report. Ms Schwab also said come industries face "frustrating barriers" when doing business in China, and highlighted concerns that China's market liberalization had been slowing down in the past year.

But analysts also say China has transformed into a far more sophisticated nation in the past five years - and that Mr Paulson and his mission will face a country that is more assertive in trade matters.

The trip comes amid mounting pressure for China to reform its currency, and a day after data showed that China has replaced Mexico as the second largest trading partner with the US. The US - the world's largest economy - posted figures showing its deficit with China had risen by 6.1% in October compared with the previous month.

Critics blame the growing deficit with China largely on China's currency, the yuan, being artificially weak.This makes Chinese exports to the US cheap in comparison with US goods.

(Courtesy BBC NEWS)