US preps for 8th S&ED

China and the United States will kick off their annual high-level bilateral meeting early next month in Beijing to address a set of serious bilateral economic and security issues.

The Eighth Strategic and Economic Dialogue (S&ED) will be the last one to be held under the Obama administration.

Nathan Sheets, the US undersecretary of treasury for international affairs, praised the last few years' S&EDs for making progress in such areas as promoting rule of law, strengthening regulatory transparency and encouraging economic reforms.

Sheets said he was especially happy with last year's S&ED, which took place a few months before President Xi Jinping's state visit to the US in September. "We were able to have a robust exchange of ideas and make concrete progress on an ambitious set of economic outcomes," he told a group at the Brookings Institution on Tuesday.

Sheets said the US will engage China on a number of key issues this year, including global excess industrial capacity, investment liberalization and macroeconomic rebalancing. He gave a long list of US concerns, from market access to a level playing field and exchange rates.

Chinese officials have not publicly talked about their agenda for this year's S&ED. But China has long pressed the US to lift its outdated restrictions on high-tech exports to China, to make the CFIUS (Committee on Foreign Investment in the United States) review process of Chinese foreign direct investment in the US fairer and more transparent.

Sheets said the two authorities were discussing mechanisms to facilitate RMB trading and clearing in the US, something he described as a "priority highlighted in President Obama's meeting with President Xi last September."

He said the US is waiting for a new negative list from China in negotiating a high-standard Bilateral Investment Treaty (BIT).

Hope for a BIT to be concluded under the Obama administration has been dampened by the 2016 US election. The Obama administration is still trying to get a divided Congress to ratify the Trans-Pacific Partnership (TPP). Anti-trade rhetoric has been running strong on the presidential campaign trail.

Sheets noted that China has begun embarking on a reform agenda towards more sustainable and balanced growth by addressing issues such as industrial overcapacity, opening up the service sector, strengthening the social safety net, implementing land reform and promoting a more market-based financial system.

"Constructive engagement with China is important for the United States and for the millions of American jobs which depend on a strong, stable and growing global economy," he said.

"This year's S&ED will be the last in the Obama administration. I must stress that the continued cooperation with China on the diverse set of issues covered in the S&ED is crucial not just for our respective countries, but globally as well," he said.

While a slowing Chinese economy has drawn wide concern, IMF First Deputy Managing Director David Lipton said that China "certainly can continue to make an important contribution as the biggest single contributor to global growth for some time."

"Don't forget, in 2015, China's growth was equivalent to adding an economy the size of Poland or Sweden to global GDP," he said in Washington on Tuesday.

Robert Zoellick, the former president of the World Bank, said on Monday that the US and China could find common interest in China's One Belt One Road Initiative.

Sheets, when asked to comment on the possible cooperation, did not say whether the US will participate in the Belt and Road or the China-led Asian Infrastructure Investment Bank (AIIB). He repeated the US rhetoric of ensuring high environmental and governance standards by the AIIB.

The Obama administration drew wide criticism even within the US for its negative response earlier to China's AIIB initiative, something widely seen as a rising China playing a positive and constructive role on the global stage.

China's State Councilor Yang Jiechi and Vice-Premier Wang Yang will head the Chinese delegation to this year's S&ED. The US team will be led by Secretary of State John Kerry and Treasury Secretary Jack Lew.

Kerry will also join China's Vice-Premier Liu Yandong for the Seventh China-US Consultation on People-to-People Exchange (CPE).