The China-US Strategic Economic Dialogue (SED) is to some extent equivalent to making an official commitment twice a year by the two countries to open their domestic markets to each other.
The world would lose its groundwork for economic openness if China and the US, as the world's largest developing and developed country respectively, shut their doors to each other.
In this sense, the two countries should carry on the high-level economic dialogue, and more importantly, should reach a consensus on some key issues through the mechanism.
The successful conclusion of the two-day fourth round of the SED in Annapolis, Maryland, last Wednesday, has made it possible for the momentum of economic globalization to continue.
That is why US Treasury Secretary Henry Paulson, who co-chaired the dialogue with Vice-Premier Wang Qishan, made a statement, saying that it does not matter if the US and China do not always agree with each other on economic issues, and even if they sometimes stand far apart on some issues. On the contrary, he believed, what does count is continuous dialogue between the two countries, because that would help keep the world's most important and most complicated bilateral relations stable.
The dialogue mechanism, initiated by President Hu Jintao and US President George W Bush in 2006, is not expected to change even in the post-Paulson era, no matter whether a Democrat or a Republican assumes the US presidency.
Different from the previous ones, the fourth round of the dialogue was conducted under the background of a weak dollar policy the US has continuously maintained. Thus, throughout the dialogue the concern from the Chinese side over the weak dollar overweighed the US demand for Beijing to marketize its RMB exchange rate and revalue the yuan.
A member of the Chinese delegation, Zhou Xiaochuan, governor of the People's Bank of China, accused the US of letting devaluation of the dollar stay, saying such a policy had fuelled the prices of crude oil and other bulk commodities to rocket. This, he said, has provoked global inflation and harmed developing countries.
Now the key issue facing China and the US is not the former deliberately keeping its RMB exchange rate low, but that the two countries should work together to deal with the global inflation crisis induced by the weak dollar. Another thorny task China and the US have encountered is how to overcome waves of economic conservatism that has gained ground.
This was pointed out in a straightforward way by Vice-Premier Wang Qishan, who led the Chinese delegation to the US as special representative of President Hu Jintao, in an impromptu speech on the evening of last Wednesday.
To make a compromise with economic conservatives, the US government had to close the country's door of openness to a certain degree. Only a few days before the dialogue with China, the Treasury Department issued a regulation, demanding the Committee on Foreign Investment in the US launch a national security investigation into foreign investments to find out if investments into sensitive American assets possibly involve changes in their right of control. There is no exception to a foreign investment even if its ownership of the US assets is lower than the 10 percent threshold.
The regulation also encourages foreign investors to waive certain rights, such as a seat on the board of directors and the power to dismantle or employ the company's management, to avoid the impression that they want to grab its controlling right.
At the same time, there were once rumors that the US Federal Reserve temporarily halted the application by Industrial and Commercial Bank of China and the China Construction Bank for setting up a branch in the US on the ground that the final shareholders of the two banks, China's Central Huijin Investment and China Investment Corp, were believed to have solid official backgrounds, and lacked transparency.
Earlier in July 2007, the US passed the Foreign Investment and National Security Act, redefining the national security issue related with the merger and purchase of foreign capital, and setting more stringent procedures for inflowing foreign investment. The act increased the number of key fields that possibly threaten US national security from eight to 11.
Such moves taken by the US have violated market rules and also run contrary to the principle of openness long advocated by the US itself. They are also evidence of the US lack of confidence in its own economy under the ever-changing global economic configuration.
Both countries should be open to each other on an equal footing and that should be beneficial to their national interests. In fact, due to the continuous appreciation of the yuan and the pressure of inflation, China's manufacturing industry has been in an abyss of misery and thousands of enterprises have gone bankrupt.
As a result of its pressure on China to appreciate the yuan, the US has to face the rising prices of daily necessities, and the good time of imported deflation is gone.
The two-day high-level dialogue also saw the signing of a 10-year energy and environment cooperation framework between the Chinese vice-premier and the US Treasury Secretary.
The US and China had to sit down face-to-face talking about the ever-deteriorating oil situation in the world.
The two countries should carry out long-term energy cooperation. During the dialogue, the two countries clinched details on the 10-year cooperation program to begin with such fields as increasing efficiency in power generation and its transportation, raising efficiency in transport and reducing emission, treating water and air pollution, and preserving natural resources like forests and wetlands.
Without cooperation and coordination from the world's two largest oil importers, it is impossible to curb the global carbon emission.
Cooperation between China and the US reflects the changes the world's economic and strategic patterns have undergone. The game the two countries play on an equal footing will add to the world's economic stability and the global balance of power.
The author is a commentator on finance and economics based in Shanghai
(China Daily 06/27/2008 page8)