U.S., China To Discuss Trade, Currency Policy

BEIJING — The United States and China began two-day ministerial talks Monday in Beijing, focusing on how the two countries will deal with North Korea after an international team of investigators last week found it responsible for the deadly sinking of a South Korean warship in March. At the second round of the U.

BEIJING — The United States and China began two-day ministerial talks Monday in Beijing, focusing on how the two countries will deal with North Korea after an international team of investigators last week found it responsible for the deadly sinking of a South Korean warship in March.

At the second round of the U.S.-China Strategic and Economic Dialogue, top officials from the world's biggest and third-largest economies are also expected to discuss China's currency policy, bilateral trade, energy security, climate change, Iran's nuclear ambitions and counter-terrorism.

U.S. Secretary of State Hillary Clinton and Chinese State Councilor Dai Bingguo chair the strategic part of the dialogue, while U.S. Treasury Secretary Timothy Geithner and Chinese Vice Premier Wang Qishan lead the economic segment.

The meeting comes as South Korea reportedly prepares to refer the March 26 sinking of the Cheonan in the Yellow Sea, which killed 46 sailors, to the U.N. Security Council for possibly further sanctions on North Korea.

While the United States has said it "strongly condemns" Pyongyang for "an act of aggression," China, a traditional ally of North Korea, has yet to blame the North over the incident and said it is studying the report.

Countries are closely watching how China will respond to Seoul's action as a veto-wielding permanent member of the Security Council.

"As Minister Okada and I discussed, we will be in deep and constant consultations, not only between the United States and Japan, but also with South Korea, China, and others to determine our response," Clinton said at a joint news conference Friday with Japanese Foreign Minister Katsuya Okada in Tokyo.

North Korea has repeatedly denied involvement in the Cheonan case, calling the report a "fabrication." Pyongyang threatens to employ "tough measures including an all-out war" if it is hit with retaliation and sanctions.

On the economic front, the United States and China are expected to exchange views on Beijing's dollar-pegged currency policy, the impact of the eurozone sovereign debt crisis on the world economy and fiscal and monetary policies in the two countries to promote balanced growth.

China is believed to have dismissed calls for an immediate revaluation of the yuan because the country has said it will make decisions on exchange rates independently after taking into account domestic economic and social conditions and the world economic situation.

Beijing has faced pressure from Washington in the past months to allow the yuan, also known as the renminbi, to appreciate as a way of balancing the U.S. trade deficit with China. U.S. manufacturers say the yuan is undervalued to give Chinese products an unfair trade advantage.

China is likely to ask the United States to ease export controls on civilian high-tech products to China.

If Washington takes such a step, "its export competitiveness can be further improved," Finance Minister Xie Xuren said in an essay published in the Sunday issue of the Washington Post. "This would also help it balance trade with China."

The U.S.-China Strategic and Economic Dialogue was established during a summit between U.S. President Barack Obama and Chinese President Hu Jintao in London in April 2009. The first round of talks was held in July that year in Washington.

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