China’s vice premier, Wu Yi, has given a clear signal that the country is interested to go ahead with reform and opening up of the economy. She was speaking at the beginning session of the first U.S.-China strategic economic dialogue. According to the reports, the vice premier has affirmed that China will ‘continue to deepen reform of the financial system’ and ‘reform the price-forming mechanism’ in order to interest rate and exchange rate to be based actually on market supply and demand graph.
On the other hand, U.S. Treasury Secretary Henry Paulson is under tremendous pressure by the American companies to emphasize on the importance of the currency flexibility. However, the solution of this problem is very much unlikely to be solved this time around. Even the U.S. establishment does not see a major breakthrough to be made in near future. However, they would definitely try to address the issue in order to pressurize China to solve the dispute in future.
Apparently taking a balancing approach the U.S. has decided to emphasize on continuation of opening market to trade, competition and investment. Needless mentioning the Americans want a deeper penetration in Chinese market.
Following the recent trend it would be immaturity to predict any miraculous outcome from the ongoing summit in China as it always prefers gradualism. Since long the U.S. has been alleging that China is manipulating its currencies to expand its export base. However, even if China would be willing to make the currency flexible it would take year to accomplish.
