The Euro zone crisis is one of the most important economic issues facing the recovering world economy. The crisis has injected fresh uncertainty about the US recovery and the sustainability of China's boom. The Euro zone debt crisis is, therefore, likely to be the most prominent economic issue discussed. The American expectation is that China should learn from the crisis, promote domestic consumption and rely less on exports. China acknowledges its over-dependence on foreign trade but it will take some time for an economy of its size to readjust. No dramatic structural changes can be expected in the short term. China will continue to follow its gradualist philosophy of economic reform. Meanwhile, the Chinese expectation is that the U.S. should reflect on what has happened in Europe, examine its own fiscal situation, and work on its "double deficit." Such arguments are ongoing, but at least the SED serves as a forum within which both sides can work together on stabilizing the world economy.

The top bilateral issues on the economic front will be RMB revaluation and recently raised American concerns over Chinese moves to promote indigenous innovation. RMB revaluation will not be a central issue at this SED, but China will press the Americans to ensure the US Treasury does not classify China as a currency manipulator this July.

It is unlikely China will accept American arguments on its indigenous innovation policy. Strong industrialization has to be led by indigenous innovation, as America's own experience shows. The Chinese government understands the concerns of the US side but is very unlikely to take any action on this matter.

With regard to the pressing global issue of climate change, China and the U.S. are already cooperating to some extent. The SED will continue to explore ways to build a more meaningful clean energy partnership between the two nations.

To sum up; regional and multilateral issues will be top priorities at the upcoming SED. Although both sides will continue to explore bilateral issues, consensus building on regional and multilateral issues is more important at this stage. It is also worth mentioning that this second SED will help China and the U.S. to build consensus ahead of the upcoming G-20 to be held in Toronto in June.

The author is a columnist with China.org.cn. For more information please visit:

http://www.ccgp-fushun.com/opinion/node_7075405.htm