Turning attention from efforts to calm the U.S. credit crisis, Treasury Secretary Henry Paulson meets Wednesday with China's new point man on strained trade ties with Washington _ a former star banker who Paulson has called a friend.
The meeting with Vice Premier Wang Qishan comes as Beijing's crackdown on protests in Tibet and U.S. financial turmoil have overshadowed pressure from Washington and calls for possible sanctions over trade and currency controls.
'Mr. Paulson will want to know more about Wang Qishan,' said Li Kui-Wai, an economist at the City University of Hong Kong. 'He's coming to see how he's going to conduct economic affairs in China.'
Wang succeeded retired Vice Premier Wu Yi, China's leading problem-solver, as Paulson's counterpart in a high-level dialogue on trade, currency and other disputes. His duties also include reforming China's state-run banking and finance system.
Paulson will be the most senior U.S. official to visit Beijing since protests in Tibet and the government's crackdown. Washington has appealed to Beijing for restraint and to consult with representatives of the Dalai Lama, the exiled Tibetan leader.
No agreements are expected from Wednesday's meeting, which is preparation for the next full-scale meeting of the Strategic Economic Dialogue, scheduled for June.
But the appointment of Wang, a former Beijing mayor and president of China Construction Bank, a major state-owned lender, raised hopes of new momentum in financial reforms.
Beijing is under pressure to open its banking industry wider to foreign competition and ease controls that its trading partners say keep its currency undervalued, giving exporters an unfair advantage and adding to China's swollen trade surplus.
'The appointment of Wang Qishan as vice premier with responsibilities for economic and financial policy may bring momentum to the economic dialogue,' said Jing Ulrich, chairwoman of China equities for JP Morgan Chase & Co. 'Wang would bring a deep knowledge of the financial sector to the negotiating table.'
The two men first met when Paulson worked for Goldman Sachs Group Inc. and Wang was a banker. In an interview with The Wall Street Journal last month, Paulson called Wang a friend and praised him as able and easy to communicate with.
Still, Wang will be constrained by Chinese politics and the need to carry out Communist Party directives, Li said.
'Whatever Wang Qishan did previously, he's a different Wang Qishan now,' Li said. 'He has to do whatever the party wants him to do.'
Wang's predecessor, Wu, also was widely respected and had such a close relationship with Paulson that they once entered a Beijing news conference holding hands. But Wu responded to pressure for faster progress on trade issues by saying Beijing was moving as fast as it could. She complained that Americans failed to understand China.
The agenda of the wide-ranging dialogue has been broadened to include the environment and product safety after a series of recalls of Chinese exports, from toys to tires, that were deemed dangerous. The two sides agreed last year to cooperate over a 10-year period on environmental issues, including climate change, energy security and promoting the sustainable use of natural resources.
On Thursday, Paulson is due to deliver a speech about that agreement at the Chinese Academy of Sciences, a government think tank, according to the Treasury Department.
Analysts say domestic pressure on Washington for action over China's trade record has eased as Americans focus on this year's presidential elections. But they say Beijing could face more pressure from a new Congress in January if the U.S. economic malaise drags on.
China broke a direct link between its currency, the yuan, and the U.S. dollar in mid-2005 and has allowed it to rise by nearly 18 percent since then. On Tuesday, the dollar was worth 7.02 yuan and appeared poised to break through the symbolic level of 7.
The United States wants the yuan to appreciate faster, and some American lawmakers are calling for punitive tariffs on Chinese imports. Washington reported a US$256.3 billion trade deficit with China last year, its highest on record with any country.
Paulson also is due to meet with Chinese President Hu Jintao and the country's top economic official, Premier Wen Jiabao.
Chinese leaders are likely to Paulson for an update on the status of the U.S. credit crisis triggered by a wave of defaults on subprime mortgages and its possible impact on Chinese banks, which hold subprime debt, said Li.
'I'm sure that's going to be an issue in the talks,' Li said.
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