Next week's Sino-US Strategic Economic Dialogue comes at a critical time because the Bush administration is under increasing pressure from the Democratic Party-controlled Congress to sort out its trade disputes with China, a Chinese expert said yesterday.

"The Bush administration has been trying to ward off domestic pressure on trade disputes with China. But it seems to have stopped doing so recently in the face of mounting pressure from the Congress and the American people," Shi Yinhong, director of the Center for American Studies of the Renmin University of China, said.

The heating up of the presidential campaign has added to the pressure on Bush before the second round of the dialogue, scheduled for May 22-23 in Washington.

Related readings: Rate reform 'will be gradual' The upcoming strategic economic dialogue with the United States can help iron out wrinkles in the relationship, but China has no plan to change the pace of its exchange rate reform despite pressure from Washington, government officials said  Window to future relations President Hu Jintao and US President George W. Bush agreed in August 2006 to create a Strategic Economic Dialogue (SED) between China and the United States.

The world has become so interdependent that it's natural for the two big economies to have economic disputes, Shi said.

"The point is not about trying to find a problem-free economic environment; it is about looking for a channel to divert these disputes and clear our misunderstandings."

"Disputes can arise at any place, but the Strategic Economic Dialogue, (along with dozens of other talks), provides such a channel for officials and ordinary people in the US and China to exchange views and make some compromises," he said.

Currency exchange rate, intellectual property rights and market access to China are expected to be on top of the US agenda, Shi said. But it's unrealistic to expect any breakthrough in these areas.

No breakthrough, however, doesn't mean failure or that high-level officials should not be present at such meetings.

It can be considered fruitful if they can make some progress in those areas because even a small progress can relieve the pressure on the Bush administration, he said.

China understands the pressure Bush is facing, and has done a lot to help relieve it. But there's no reason for it to be blamed for that, he said.

To go with the world's existing economic environment, China has adopted a "managed floating exchange rate", and the yuan has already appreciated 5.4 percent since 2005.

The yuan became more flexible recently and is expected to be more fluctuating, said Zhao Xijun, a professor in the School of Finance of Renmin University of China.

"The increase in federal reserves and trade surpluses and flow of foreign capital into the Chinese stock market have increased the pressure on the government to appreciate the yuan further," Zhao said.

To solve the problem of the trade surplus, China has been working to adjust its trade imbalance and currency rate both, he said.

The complaints and demands of our trade partners such as the US are often based on their own political or industrial considerations, Zhao said.

Premier Wen Jiabao has made it clear China has already set the course of its direction for the exchange rate reform, but it must be based on China's domestic situation.

(China Daily 05/16/2007 page2)