In relative terms, the US is one of the three most rapidly growing markets for Chinese investment - the others being the European Union and Japan. In absolute terms, however, the volume remains small. The US is at risk of missing the advantage of being an early mover in the world's fastest-growing large emerging economy.

In November 2010, China's holdings of US Treasuries reached $896 billion, and Beijing remained the largest foreign holder of the Treasuries. Two months before, the debate over China's alleged "currency manipulation" moved to a new level when the US House of Representatives approved legislation that would allow the US to seek trade sanctions against China and other nations for engaging in "currency manipulation" to gain trade advantages.

Yet imports of inexpensive goods from China are not the primary cause of declining manufacturing output or job losses in the US. Even a significant exchange adjustment will not bring the lost low-cost jobs back, nor will a political currency blame game, which is just a distraction.

The yuan rose by almost 20 percent by the end of 2009 after Beijing reformed its currency policy in 2005. China will also make the yuan convertible on the capital account in the next five years and maintain its efforts to internationalize its currency' further.

Effective global rebalancing cannot be resolved through bilateral pressure; it requires multilateral cooperation.

For the success of bilateral relations, it is important to:

broaden trade relations, because imbalances will decline gradually in the coming years;

relax US export controls, which will bring know-how to China and jobs and investment into the US;

increase cooperation to strengthen Sino-US investment cooperation; and

deepen bilateral ties, which will precipitate the convertibility of the yuan and support the dollar.

Given a stable international environment and internal cohesion, China may be able to sustain relatively high growth for another 10 to 20 years. The interdependent relationship between the US and China has the potential to ease China's transition to a new stage of growth and facilitate the US' recovery from the worst recession since the Great Depression.

With cooperative policies rather than friction, US can facilitate China's growth and benefit from it.

The author is research director of International Business at the India, China and America Institute, an independent think tank in the US, and visiting fellow at Shanghai Institutes for International Studies.