US and China getting ready for economic talks

WASHINGTON -- A global credit crisis and record oil prices will be competing with traditional trade and currency issues when top officials from the United States and China gather in Annapolis, Md., later this month.

However, there is little expectation the fourth round of these high-level discussions will produce any major breakthroughs.

The discussions, given the weighty title of the "Strategic Economic Dialogue" when they were launched in 2006, could in fact be on life support, waiting to be put out of their misery by the next administration.

That is not the outcome envisioned by Treasury Secretary Henry Paulson, who had big plans when he came up with the idea to gather a large contingent of President Bush's Cabinet with their counterparts from the Chinese government twice a year, alternating between the two countries.

The next meeting was scheduled for June 17-18 at the U.S. Naval Academy with Paulson giving a speech in Washington on Tuesday outlining the administration's hopes for the gathering. Considering the daunting challenges he faces, he may well use his talk to try to lower expectations.

The two sides will certainly have a lot of concerns about the global economy to keep them occupied: soaring oil prices, a severe credit crunch, worries about a recession in the United States.

Oil prices took their biggest single-day leap ever on Friday, jumping by nearly $11 to $138.54 per barrel, an increase that helped drag down the Dow Jones industrial average by nearly 400 points as investors grew more worried about the fate of the U.S. economy.

Those fears were heightened by a report earlier in the day that the U.S. unemployment rate jumped one-half percentage point in May to 5.5%, the biggest increase in 22 years.

The administration would like to ease worries about employment in the United States by getting China to allow its currency, the yuan, to rise more quickly in value against the dollar. U.S. manufacturers contend that the Chinese have gained unfair trade advantages by keeping the yuan undervalued, making Chinese goods cheaper for American consumers and American products more expensive in China.