The Sino-US Strategic Economic Dialogue (SED) will start its fifth two-day session on Thursday in Beijing, with all eyes on how the two major economies will face the global financial crisis together even as Washington prepares for a handover of power to the Obama administration next month.

Initiated by President Hu Jintao and his US counterpart George W. Bush in 2006, the semiannual dialogue has become a major channel for policymakers in the two countries to maintain frequent contact and enhance mutual trust.

The two sides have reached consensus on nearly 150 areas during previous SED sessions, covering issues such as macroeconomic policy, environmental protection and energy efficiency, Assistant Minister of Finance Zhu Guangyao said last week during a news briefing.

Analysts and businesspeople are holding high expectations of the coming dialogue, but the impressive achievements of previous sessions have not fully satisfied critics in the US who say the process has failed to resolve the most important issue on the table: getting China to appreciate the yuan.

"The incoming Obama administration may want to put concerns over the yuan exchange rate high on the agenda to calm some critics in its party if he decides to continue the dialogue," Sun Zhe, director of the Center for Sino-US Relations at Tsinghua University, told Caijing magazine earlier last month.

"This is an issue that China and US will face off sooner or later, putting it on the agenda may even make it easier for the two sides to conduct the dialogue," Sun said.

With the inauguration of the Obama administration a month away, observers say how the Republican Bush-initiated SED mechanism will fare under the new Democrat-Obama leadership - a mechanism now seen by many as a barometer of Sino-US relations - will be under increasing scrutiny.

The shared interests and increasingly important bilateral trade and economic relations between China and the US mean that dialogues like the SED should be continued, analysts said.

The ongoing global financial crisis has made such a platform even more important as the cooperation between the two countries - the US being the world's largest developed economy and China its largest developing one - are critical to counter the economic slowdown, they said.

"It is in the fundamental interests of the two countries to continue the dialogue, regardless of who the US president is," said Shen Dingli, director of the Center for American Studies at the Shanghai-based Fudan University.

The US needs China's cooperation to tackle the current financial crisis as the latter holds a large amount of foreign exchange reserves, Shen said.

"Our recent close and frequent communication and cooperation, as we address the challenges in the financial markets, are tangible examples of the power and utility of a Strategic Economic Dialogue based on mutual trust," US Treasury Secretary Henry Paulson, who will head the US delegation to the 5th SED, said last month.

"This framework provides the next administration a critically important platform for US economic engagement with China," Paulson said.

Paulson is expected to elaborate his views on the dialogue mechanism in a press conference this morning in Washington.

"I hope Henry Paulson can convince Obama to continue the SED, that is very important," said James McGregor, chairman and CEO of JL McGregor & Company, a China-focused, China-based independent research firm.

(China Daily December 3, 2008)