WASHINGTON - US Treasury Secretary Henry Paulson will visit China's largest lake next week on a trip that will highlight global environmental challenges.

Treasury Secretary Henry Paulson speaks during an interview with Reuters in Washington July 2, 2007. [AP]

Paulson will also hold talks in Beijing with President Hu Jintao that will focus on the Strategic Economic Dialogue, high-level discussions launched last year in an effort to deal with economic tensions between the US and China.

"This trip is part of an ongoing process to strengthen our strategic economic relationship - to address long-term issues such as working with China to rebalance its growth and increase the flexibility of its currency and also to address short-term issues as they arise," Paulson said Tuesday in announcing the trip.

Paulson will begin the trip with a visit July 30 to Qinghai Lake, the largest lake in the country and an example of some of the environmental challenges facing China as it struggles to deal with pollution.

"The only way to make progress on climate change is to engage all the large economies, developed and developing, to work toward embracing cleaner technology and reducing emissions," Paulson said. "What's happening with the environment in the middle of China not only affects the local climate and economy but also the global climate and economy."

Paulson will meet on July 31 in Beijing with Hu and Vice Premier Wu Yi, who is leading the Chinese side in the strategic dialogue talks.

The administration is coming under pressure from Congress to show results from these discussions, particularly in the area of currency values. American manufacturers contend that the yuan is undervalued by as much as 40 percent, which makes Chinese products cheaper for US consumers but makes it more difficult for US products to be sold in China.

The first strategic dialogue session was held in Beijing last December with a follow-up meeting in Washington in May. The two countries have pledged to meet twice a year with the next session to take place in China later this year. An exact date has not yet been announced.

The Treasury Department said in a statement announcing the trip that Paulson in his meetings with Chinese leaders would raise issues of concern to Congress as well as follow up on issues that were identified as priority items at the May meeting of the strategic dialogue.

US lawmakers have grown increasingly unhappy as America's trade deficit with China has soared, hitting $233 billion last year, the largest ever recorded with a single country and one-third of the US total deficit with the rest of the world.

Various bills have been introduced that would require the administration to take a harder line on the currency issue including pursuing economic sanctions if China does not move more quickly to allow its currency to rise in value against the dollar.

China has reiterated that it does not manipulate its currency and the currency reforms are moving as quickly as the developing economy and financial system will allow.