U.S. Treasury Secretary Timothy Geithner is on a two-day visit to China, where he is expected to discuss U.S. sanctions against Iran and the huge imbalance in China-U.S. trade.
Chinese Vice Premier Wang Qishan is hosting Geithner for a dinner in Beijing Tuesday, followed by a day of meetings with Chinese officials on Wednesday.
Chinese Foreign Ministry spokesman Liu Weimin says the two sides will exchange views on economic relations as well as the global financial landscape.
He says the two countries agree on establishing a cooperative partnership based on mutual respect and mutual benefit. He adds that Sino-American cooperation is needed to tackle what he describes as “grave” global economic challenges.
Geithner's visit comes as China released trade figures Tuesday that show its overall trade surplus shrank more than 14 percent - from $183 billion in 2010 to $155 billion in 2011.
China has been accused of purposely keeping the value of its currency low to help its exports. But Hong Kong University visiting public administration professor Alejandro Reyes says China's shrinking trade deficit may help weaken the arguments of critics in the United States who urge Beijing to revalue its currency.
“The administration has resisted naming China as a currency manipulator and there are signs, although there is a lot of rhetoric about trade surplus, a little 'bit of the wind in the sails' of the argument against China has come down because the trade surplus itself has come down,” Reyes said.
Another issue in Geithner's talks is America's efforts to persuade other countries to support sanctions targeting Iran's oil profits. The United States and European Union believe Iran is trying to develop nuclear weapons and they have been tightening sanctions in a bid to stop its suspect activities. Tehran says its nuclear program is strictly for peaceful purposes.
China did not veto United Nations sanctions against Iran, but has expressed its opposition to the much tougher U.S. sanctions. Beijing says domestic laws should not over-ride international laws, in the form of already existing U.N. sanctions against Iran.
Reyes says China does not want to be seen as being pushed to do something by the United States, and would rather play some kind of behind-the-scenes role.
“How much leverage they [China] have is a good question, but it is an important question," Reyes said. "But I can see where if the United States plays this card, the Iran card, plays it hard and the European Union is also there, that China could sort of stiffen its resolve and there could be kind of bad blood that emerges from that.”
Although China is Iran's top oil customer, there are reports that it has already reduced its purchases of Iranian crude in the past month because of a dispute over prices.
Meanwhile, Chinese Premier Wen Jiabao is leaving Beijing Saturday for a trip to Saudi Arabia, the United Arab Emirates and Qatar - three key oil and gas suppliers. The Chinese leader also is set to attend the Fifth World Future Energy Summit in Abu Dhabi next week.