U.S. aims for long-haul gains in China talks

BEIJING (Reuters) - Immediate gains from the latest U.S.-China economic talks appear limited, but U.S. officials argue the two sides are making strides towards the goal of getting real results out of complex negotiations.

U.S. Treasury Secretary Henry Paulson said from the outset of the "strategic economic dialogue" he initiated a year ago that identifying and relating to key players was the first step towards putting increasingly entwined U.S.-China ties on a new footing that would keep inevitable tensions in check.

As the third round concluded on Thursday with what Paulson conceded was "modest progress" in opening Chinese financial markets, the U.S. Treasury chief stuck to his theme that close engagement was the correct course to take.

"The value in an economic relationship of being able to pick up the telephone and trust that the person on the other side is giving you the facts and telling you -- even if you disagree -- what they believe the facts to be, so you can work through them, is very, very important," Paulson told reporters.

The former Goldman Sachs chairman, with about 70 trips to China under his belt before becoming U.S. Treasury chief in mid-2006, has made getting-to-know-you a business strategy that he plies relentlessly.

"You don't start something up and immediately have that level of trust," he said.

MEET THE CHIEFS

After two days of economic dialogue outside Beijing, Paulson headed straight to meetings in the capital with Premier Wen Jiabao and President Hu Jintao, hitting the theme that "a bond of trust" was being forged.

"There is a comfort to our communications that makes it easier to deal with the most sensitive and complex and difficult issues," Paulson told Hu in an ornate room of the Great Hall of the People.

At the economic dialogue, and at a preceding session of the Joint Commission on Commerce and Trade, Chinese officials showed they were honing their own communications skills and making sure the Americans were not the only ones making their views heard.

A parade of officials briefed reporters each day, with interpretation for English speakers, to put their spin on issues like America's perennial prodding of Beijing to let China's currency rise more swiftly.

Vice-Commerce Minister Chen Deming neatly turned the tables by not only saying he did not want the yuan to rise too fast -- which would hurt Chinese exporters -- but by taking a jab at Washington. "What I'm worried about now is the weakening dollar and its impact on global growth," Chen said.

KEEP IT GOING

Early reaction to the tactical approach to the talks was positive.

John Frisbie, president of the U.S.-China Business Council, said the dialogue was critical for pushing forward on long-run concerns like food and product safety, energy and the environment, and financial sector development.

"Progress on these issues cannot happen without this ongoing commitment at the highest levels, as indicated by the recent creation of similar forums between China and the European Union and Japan," Frisbie said.

The president of the Financial Services Forum, Rob Nichols, said his group was pleased to see some progress in making it easier for U.S. firms to make inroads into China's market.

"However, we continue to believe that the pace of reform is too slow," Nichols added.

The U.S.-China dialogue faces several challenges, not least that the key official on the Chinese side, Vice Premier Wu Yi, is due to retire next March. Time is also running out for the present U.S. administration, with campaigning for November 2008 presidential elections swinging into high gear.

Paulson acknowledged as much, saying "one of the things I'm focused on here is transition" and giving the talks an institutional underpinning that will keep them going after he and Wu move on.

"One of the big advantages of this from the beginning was not just to have two people talking," Paulson said. Rather, the broad format pulls in top officials from different ministries and keeps the talks from being "stovepiped", or confined to narrow topics.

Analysts like Aimin Yan, a professor at Boston University's School of Management, broadly agree with Paulson's approach, given that the United States needs China's low-cost production as much as Beijing wants America's needy consumers.

"Confrontation and threats won't work unless you have the dominant bargaining chip," Yan said. "In business dealings, and international politics alike, you don't get what you want, even what you feel you deserve. You get what you negotiate."

(Additional reporting by Eadie Chen; Editing by Alan Wheatley and Alan Raybould)