U.S. President Barack Obama and Chinese Premier Wen Jiabao are set to meet Thursday as the two countries spar over whether China needs to raise the value of its currency.
The two leaders are planning to meet on the sidelines of the U.N. General Assembly. Both made their positions clear this week on whether the value of China's yuan should increase to help reduce U.S. trade deficit with China.
Mr. Wen told U.S. and Chinese business leaders on Wednesday there would be "major turbulence" in China, with corporate bankruptcies and increased unemployment, if the yuan appreciated by 20 to 40 percent "according to the requests" of the U.S. government.
But Mr. Obama said earlier in the week that the yuan was "valued lower than market conditions would say it should be." He said the U.S. would "continue to insist" on parity in trade between the two countries.
Mr. Wen said the U.S. trade deficit was caused by the "structure of Sino-U.S. investment and trade," not the level of China's currency. The U.S. has more than a $145 billion trade deficit with China through the first seven months of this year.
China tightly pegged the yuan to the U.S. dollar beginning in 2008, a move that made Chinese goods cheaper on the global markets. U.S. lawmakers and business leaders say this gave China an unfair trade advantage.
A House of Representatives panel is scheduled to vote Friday on legislation that would let U.S. Commerce Department officials impose tariffs on Chinese products entering the United States to help offset the trade imbalance.
Despite the contentious words about the currency valuation, Mr. Wen told the business leaders that he "fully believes" that all the disputes between the two countries will be resolved. He said the U.S.-China relationship "enjoys a bright future" and that the common interests "far outweigh our differences."
Some information for this report was provided by AP, AFP and Reuters.