There are always ample bilateral issues of strategic importance for China, the world's fastest-growing developing economy, and the United States, the world's largest economy, to discuss.

 

The second round of the China-US Strategic Economic Dialogue that begins today in Washington provides a much needed opportunity for the two sides to exchange ideas and coordinate efforts to address sticking points in bilateral trade and economic relations.

 

As two major growth engines in the world economy, China and the United States have born the brunt of the increasing trade imbalance in their own ways.

 

Accelerated accumulation of foreign exchange reserves, largely fueled by a soaring trade surplus, has made it more difficult for Chinese policymakers to check the ongoing growth in excessive liquidity.

 

The 11.1-percent GDP growth in the first quarter of this year indicates that China's sizzling economy may be in danger of overheating if policymakers do not respond promptly.

 

Meanwhile, a ballooning current-account deficit not only worries US policymakers but has given rise to a call for protectionism in the United States.

 

To address the trade imbalance, both China and the US need to examine a number of their own domestic issues which could be the root causes.

 

These issues are as difficult as they are important.

 

Besides pursuing a more flexible foreign exchange regime that might marginally narrow its trade surplus, the overriding task for China is to facilitate the change in its growth model. It needs to shift the balance of growth away from investment and exports toward consumption.

 

The US must understand that the real cause of its trade deficit is that Americans spend too much and save too little. No external measure can fix that domestic issue easily and painlessly.

 

All these issues demand solutions. Yet, any unilateral act to seek an immediate solution risks creating more problems.

 

Now, the strategic dialogue provides the chance for the two countries to address critical economic challenges facing their economies from a long-term perspective.

 

Policymakers from both sides should make the most productive use of the second of the twice-yearly discussions to pursue solutions that will allow both countries to benefit from the growing bilateral trade and economic relationship.

 

(China Daily May 22, 2007)