REBECCA ROBERTS, host:
This is WEEKEND EDITION from NPR News. I'm Rebecca Roberts.
U.S. and Chinese officials are gearing up for a summit this week here in Washington to discuss trade frictions and other economic issues. China has come under increasing pressure from Congress lately over its trade and currency policies and intellectual property violations.
As NPR's Anthony Kuhn reports from Beijing, China says it's addressing the problems, but it's not doing so fast enough to please Washington.
ANTHONY KUHN: When the two sides agreed last year to hold their semiannual strategic economic dialogue, the idea was to discuss long-term strategic issues. Daniel Rosen is founder of the New York-based China Strategic Advisory. He says Treasury Secretary Henry Paulson, who is leading the U.S. side, is likely to have to use the meetings to fend off protectionist pressure from Congress.
Mr. DANIEL ROSEN (Founder, China Strategic Advisory): Hank Paulson has, from the very get-go, downplayed deliverables. Of course, in reality, he's got to deliver something. Otherwise, U.S. Congress is likely to pass what I would perceive to be unhelpful trade legislation meant to be punitive toward China.
KUHN: On Thursday, U.S. lawmakers petitioned the Bush administration for a formal investigation into whether China is undervaluing its currency in order to unfairly boost exports. Since the last meeting in December, Washington has slapped tariffs on Chinese paper imports and filed a case with the World Trade Organization over China's intellectual property violations. Rosen says tougher measures could follow.
Mr. ROSEN: While it looks as though there's a real tempest afoot here, the fact is that the cases that have been pursued that far have not been the ones that would really signal that we were going to the map with Beijing over trade issues.
KUHN: As a goodwill gesture, China has sent a purchasing mission to the U.S. The estimated $16-billion shopping spree will barely dent China's trade surplus, which the U.S. put last year at $232 billion. In another gesture, China's central bank said Friday it would allow China's currency, the Yuan, to rise or fall by 0.5 percent a day. The previous limit was 0.3 percent.
The U.S. Treasury welcomed the move, but said the Yuan had to appreciate faster in order to lower the trade surplus. Economist Michael Pettis, a visiting scholar at Beijing University, thinks that's unlikely.
Mr. MICHAEL PETTIS (Visiting Scholar, Beijing University): In order to get the trade surplus to shrink, we need a very large, one-off appreciation in the currency. And the Chinese are too frightened by the potential social and banking implications of a big one-off rise in the currency. So everybody is stuck.
KUHN: Pettis says the real reason for the trade surplus is rapid industrial expansion, which means Chinese produce more than they consume. Beijing-based economist Zhong Dajun says the less Chinese consume, the fewer fruits of economic growth they get to enjoy. He notes that China keeps much of the foreign exchange it gets from its trade surplus in U.S. Treasury bonds.
Mr. ZHONG DAJUN (Economist): (Chinese spoken)
KUHN: When Chinese don't consume, he says, all this wealth they've worked hard to create goes to finance foreigners' debt. It's not good for our people's livelihood. Our country still has many poor people. Of course, this is entirely the result of our country's economic strategy.
In a letter to The Wall Street Journal last week, Vice Premier Wu Yi said China is working to reduce its trade imbalance and boost domestic consumption. Wu will have a chance to make this case this week, when Treasury Secretary Paulson is expected to take her to Capitol Hill to face lawmakers calling for punitive legislation.
Anthony Kuhn, NPR News, Beijing.