(AP/China Daily)
Updated: 2007-08-02 14:03

But critics have focused on the yuan, accusing China of keeping it undervalued by up to 40 percent. They say that gives Chinese exporters an unfair price advantage and widens its yawning trade gap.

Chinese leaders say they plan eventually to let the yuan trade freely on world markets. But they say acting too abruptly will hurt China's frail banks and cause financial turmoil.

China revalued the yuan by 2.1 percent against the dollar in July 2005 and has allowed it to rise by about 7.2 percent since then. The rate of increase has speeded up in recent months, but analysts expect Beijing to restrain the yuan's rise to about 5 percent annually over the next few years -- far less than critics want.

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The Senate is considering two bills aimed at pressuring China to overhaul its currency system.

Paulson rejected such measures, saying they would harm Washington's efforts to encourage Beijing to reform.

"Legislation would be counterproductive and would undermine what we're trying to do here," Paulson said.

Paulson has pleaded with Congress for time to let the dialogue work. But China's supercharged growth is fueling arguments that it can afford to move faster.

China's economy expanded 11.9 percent last quarter -- the fastest quarterly growth in 12 years -- and the trade surplus jumped by 85 percent in June to $26.9 billion.

Hu stresses value of Sino-US dialogue

President Hu Jintao reiterated the importance of maintaining stable and mutually beneficial Sino-US economic relations when meeting with Paulson.

He urged the two sides to make full use of the strategic economic dialogue (SED) to address issues of common concern.

Hu said the development of bilateral economic ties have not only brought tangible benefits to the people of both countries but have also been engines of global growth.

Paulson hailed the SED as helpful to enhance bilateral economic relationship; and said he will work with Wu to make the dialogue a forum to ease friction and resolve disputes.

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