U.S. Hopeful for Airline, Tech and Financial Agreements on Eve of Chinese Visit

WASHINGTON – The Bush administration said Friday it hopes for agreements on airline flights, use of U.S. pollution-control technology and other subjects when a high-level delegation from China visits next week for a second round of talks aimed at lowering trade tensions.

Alan Holmer, the president's special envoy for China, said that the administration hoped to strike deals increasing the number of commercial airline flights between the two nations, both for air cargo and passengers, and improving energy efficiency in China through the use of U.S. technology to control pollution.

The administration is also pushing for a deal that would allow U.S. financial service companies and other foreigners to buy stakes of up to 49 percent in Chinese banks, up from a current 25 percent cap. The administration would also like the Chinese to relax limits on foreign ownership of Chinese securities firms.

In advance of the discussions next week, the Chinese announced Friday that they were allowing a slight widening of the trading band for their currency, the yuan. The administration has been pushing China for more than two years to move more quickly to revalue its currency, a step American manufacturers contend is critical to boosting sales of U.S. products in China.

"The Treasury's view is that this is a useful step towards greater flexibility and an eventual float of the currency," Holmer said.

He said the administration had not received any assurances from the Chinese about how quickly they will move to allow the currency to rise in value against the dollar.

Sen. Charles Schumer, one of the most vocal critics of China's trade policies, said if China's announcement does not lead to a significant revaluation of the yuan, it will not provide any help in lowering America's huge trade deficit with China and will not stave off pressures in Congress to do more.

"This is a nice gesture, but in the past, most of their gestures have not produced any concrete change," Schumer, D-N.Y., said in a statement.

Underscoring the growing unhappiness in Congress, a bipartison group of 42 House members filed a petition on Thursday asking the administration to bring a trade case against China on the grounds the country is unfairly keeping its currency low to gain trade advantages.

Asked about the case, Holmer on Friday said the office of U.S. Trade Representative Susan Schwab would review the request under normal procedures. The administration has turned down three other petitions filed against China's currency practices.

America's trade deficit with China hit an all-time high of $232.5 billion last year, the largest imbalance ever recorded with a single country, with American manufacturers contending that China is manipulating its currency to make Chinese products cheaper in America and U.S. products more expensive in China.

The meetings next Tuesday and Wednesday will be the second session of the Strategic Economic Dialgoue, which the two countries launched in December in Beijing. It gets high-level officials from both nations together twice a year in an effort to resolve economic strains between the two nations.

Chinese officials are also expected to meet with President Bush and have discussions on Thursday with key lawmakers, where they are likely to get an earful of complaints about Chinese trade practices which American companies see as unfair.

The U.S. team will be led by Treasury Secretary Henry Paulson and will feature top officials from 10 Cabinet-level departments. Federal Reserve Chairman Ben Bernanke will also take part as he did during the first round of talks in Beijing.

The Chinese delegation, which will be led by Vice Premier Wu Yi, is expected to include 14 Cabinet-level ministers.

The administration is hoping to achieve results through the strategic talks as a way of easing pressure in Congress, which is considering a number of bills that would impose economic sanctions on China.

Paulson predicted there would be progress next week even in an environment where the United States will have elections in 2008 and China has elections in the fall to fill seats on their powerful Politburo.

"In an environment like this, it's hard to make change and progress, but we're going to get progress," Paulson said Thursday on the PBS' "News Hour with Jim Lehrer."