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Trade deficit looms large in China talks

WASHINGTON — America’s massive trade deficit with China, currency rates and human rights concerns will all be on the agenda when top officials from the United States and China sit down for high-level talks this week.

While no major breakthroughs are expected, both sides hope to build on the progress made during a state visit by Chinese President Hu Jintao to Washington in January.

Treasury Secretary Timothy Geithner, Secretary of State Hillary Rodham Clinton and Federal Reserve Chairman Ben Bernanke will lead the U.S. team.

The talks will begin with an opening session and then break into separate discussions on the economy and foreign policy. The U.S. and Chinese leaders are also scheduled to meet today with President Barack Obama. The talks wrap up on Tuesday.

China is facing threats of U.S. economic sanctions on goods shipped here to its largest foreign market unless it does more to end what U.S. manufacturers say are unfair trade practices, including currency manipulation, that have cost American jobs.

At the same time, China, America’s biggest foreign creditor, wants assurances that its $1.2 trillion in U.S. Treasury holdings are safe despite the impending congressional debate over raising the government’s $14.3 trillion borrowing limit.

“The Chinese are astounded that the U.S. government would let the debate get to the stage where there is even a remote possibility of a default,” said Eswar Prasad, a China expert at Cornell University.

The higher debt limit is needed to make sure America can keep paying the interest bill on the debt to China.

While Geithner said last week that the U.S. would press China to accelerate efforts to revalue its currency, the yuan, he also sounded a conciliatory tone. He noted that the yuan has risen in value by 5 percent since last June, and even faster once inflation was taken into account.

The U.S. trade deficit with China last year was a record $273 billion, one-fifth more than in 2009.

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