S: NPR's Tom Gjelten reports.
TOM GJELTEN: Then there's the U.S. trade deficit with China which continues to grow even as the overall U.S. trade deficit declines.
NICHOLAS LARDY: It's a very daunting agenda to try to undertake in a meeting that will only last a little bit more than a day.
GJELTEN: Nicholas Lardy is a China expert at the Peterson Institute for International Economics.
LARDY: I think the primary emphasis is going to be on reaching a broader understanding about the appropriate policies going forward on climate change and energy. I think the reform of the international financial system will get some priority.
GJELTEN: The overvalued yuan is a longstanding U.S. grievance, but Eswar Prasad, who follows the Chinese economy for the Brookings Institution says the currency complaint may have to be put aside for a while.
ESWAR PRASAD: The Chinese exchange rate is unlikely to be a major issue because it seems like the U.S. and the Chinese sides have decided to take it off the table for the immediate moment given that there are far more pressing priorities that both sides want to deal with.
GJELTEN: In fact, it's the Chinese who have all the leverage right now. They hold about 1.5 trillion dollars worth of U.S. government debt. They're worried that U.S. inflation might erode the value of that debt and Nicholas Lardy notes how they've taken to lecturing the United States in ways we haven't heard before.
LARDY: They have been in the position of getting a lot of advice from the United States over the years about the way they should reform their economic and financial system. I think they now sense U.S. vulnerability, and so to some extent they are emboldened to raise criticisms of our domestic policy, our financial policy, our fiscal policy.
GJELTEN: But Eswar Prasad, formerly a China specialist at the IMF says the Chinese know they have few investment alternatives to the U.S. dollar. Both sides know they have to restructure their economies but it will take time.
PRASAD: This dependence between the two economies, between China and the U.S. is in fact getting heightened during this process of recovery because the Chinese will continue accumulating reserves, will continue putting them into the U.S. treasuries, and continue helping to finance the increasing U.S. budget deficits.
GJELTEN: Tom Gjelten, NPR News, Washington.
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