No breakthrough at US-China talks

Commercial agreements hide a lack of progress on currency issues

The US and China have agreed a number of deals at high-level talks - but made no headway on crucial currency issues.

Among the deals agreed were an increase in US flights to China and improved access to Chinese financial markets.

US Treasury Secretary Henry Paulson welcomed "tangible results" achieved at the two-day meeting in Washington.

Chinese Vice Premier Wu Yi said the talks were a success, but warned that "complicated" relations between the two needed careful handling.

Currency concerns

Little progress was made on the key issue of the value of the yuan at the Washington meeting.

US firms have accused China of keeping the yuan low to boost exports, thus threatening American jobs - and the US Congress is backing their claims.

There is bipartisan sentiment in Congress that we are not being tough enough Congressman Tim Ryan

While the two sides failed to make any headway, Mr Paulson told reporters he had pressed Beijing for greater flexibility for the currency.

"This is an important area and they agree with us in principle," he said.

"The pace of change is picked up but I believe it would be very much in their best interests and the rest of the world's best interests for them to move more quickly."

Mr Paulson pointed to China's recent decision to allow the yuan to appreciate each day from 0.3% to 0.5% as an "important signal" that change may be in store.

Congressional pressures

But his comments did not assuage US lawmakers who are currently considering legislation to impose tariffs on Chinese imports unless the country allows the yuan to appreciate more quickly.

US politicians say China has a huge currency advantage

Some Congressmen say the yuan should be revalued by up to 40%, arguing that it has fuelled the country's growing trade deficit with China, which hit a record $233bn last year.

Following a meeting with Chinese Vice Premier Wu Yi, Speaker of the House of Representatives Nancy Pelosi said she believed China could "do more" on the issue.

"There is bipartisan sentiment in Congress that we are not being tough enough," added Tim Ryan, a Democrat Congressman from Ohio.

Chinese officials said the value of the yuan must reflect the country's key economic and social priorities.

"They may think we can accelerate the speed of reform but we think that we already try our best and domestically we have pressure to slow down," said Zhou Xiaochuan, head of China's Central Bank.

Both countries facing growing political pressures, with the US presidential election looming in 2008, and China holding its first National People's Congress in five years in October.

More flights

Among the deals agreed by the two sides during the talks, the most significant was one that requires China to ease limits on foreign investment in the country.

The move should remove a bar on new foreign securities firms in China and allow foreign firms to expand their operations there.

Daily US flights to China will double over the next five years

The limit on the amount of Chinese shares that foreign investors can buy will be raised from $10bn to $30bn in the future.

Meanwhile a further deal on the aviation sector should lead to a doubling in passenger flights between the two countries while cargo firms should have almost unlimited access to China.

By 2012, US carriers will be able to operate 23 daily flights - up from 10 currently - with Chinese airlines being allowed equivalent services.

US Transportation Secretary Mary Peters hailed the deal as a "breakthrough agreement" which would enable more frequent and cheaper travel between the two countries.