Ran into this in The Economist: America and China Paulson's party Dec 7th 2006 From The Economist print edition George Bush's entire economic team heads to China. Why? IF YOU want to discuss American economic policy next week, go to Beijing. On December 14th and 15th, Washington's top brass—Hank Paulson, the treasury secretary, along with five other cabinet-level officials and Ben Bernanke, the head of the Federal Reserve—will sit down with their Chinese counterparts for the first meeting of a new semi-annual “Strategic Economic Dialogue”. Such a gathering is unprecedented. What (aside from frequent-flyer miles) will be gained? Officially, the goal is to lift the Sino-American economic debate from narrow squabbling over China's cheap currency to bigger and broader subjects. Mr Paulson, a man who prides himself on close contacts with the Chinese leadership and who, as an investment banker, was famed for his assiduousness with clients, realised that his predecessors were perceived as hectoring foreigners in Beijing. Instead of taking that route, Washington would woo the Chinese with a dialogue among equals. he agenda is certainly lofty, covering subjects from China's energy and environmental strategies to the country's role in the global economy. Even if it is just talk, it is a meeting worth having. It surely cannot be a bad idea for the world's two biggest emitters of greenhouse gases to discuss energy security and the environment. But the American visitors have more immediate hopes—to influence Chinese policy, and to fend off protectionist pressure from the new Democratic Congress. In trade disputes, at least, the Bush team seems to be shifting gears. Until Mr Paulson's arrival, the Treasury sounded tough on China's currency, while Mr Bush's trade team held back from taking legal action on trade disputes. (America has filed only one case against China at the WTO, on car parts.) Now Mr Paulson sets a conciliatory tone, while the trade negotiators are getting tougher. Washington may soon file a WTO case accusing China of inadequate enforcement of intellectual-property rights. A second WTO case, against illegal Chinese export subsidies, may also be filed next year. America may also consider levying countervailing duties against Chinese goods that the Commerce Department considers artificially subsidised. Overall, the currency and trade imbalances remain the biggest political irritations. Chinese officials talk a lot about shifting towards a greater focus on consumption, but American policymakers doubt whether much has really been done. China's overall current-account surplus, they point out, has soared to around 8% of GDP. And protectionists frequently complain that the bilateral trade deficit exceeded $200 billion last year and is still rising. Nicholas Lardy, a China expert at the Peterson Institute for International Economics, recently wrote that the country's transition to more consumption-driven growth was “off to a slow start”. That view is echoed throughout official Washington, though there is a recognition that the pace of yuan appreciation—at least against the dollar—is gathering steam (see chart). Since September, the currency has risen by 7% on an annual basis. Politically, the big question is whether Beijing will keep up this pace of appreciation against the dollar and whether that will placate the new crowd on Capitol Hill. Conventional wisdom holds that the arrival of the Democrats has raised the risks for China, an idea Mr Paulson and his team are only too happy to propagate. There is some truth to it. Nancy Pelosi, the incoming speaker of the House of Representatives, is a staunch critic of China's human-rights record as well as a trade sceptic. She has scuffled with Chinese police on Tiananmen Square and called American trade relations with China “a disaster”. Set against that, the most dangerous piece of anti-China legislation—a bill to slap 27.5% tariffs on Chinese goods if the currency is not revalued by the same amount—has been formally withdrawn. Its proponents have promised to work with other senators on a more modest law that would not break WTO rules, a process that is likely to take at least six months. There will be much huffing about China in congressional hearings, but the Democrats seem prepared to give Mr Paulson's new strategy a shot. That could change if the economy goes into recession and unemployment rises sharply. For now, dragging much of the cabinet to Beijing seems a small price to pay for diffusing protectionist pressure at home.