China and the United States started the fourth round of their Strategic Economic Dialogue (SED) in Annapolis, Maryland on June 17. Chinese Vice Premier Wang Qishan and US Treasury Secretary Henry Paulson were co-chairing the meeting as special representatives of Chinese President Hu Jintao and US President George W. Bush.

Coincidentally, June 17 is also the departure date for the first United States-bound Chinese leisure tour group. The US Commerce Department and its tourism industry will celebrate the event and US Commerce Secretary Carlos Gutierrez will receive some of the tourists in person. It is reported that the tour group will have the opportunity to attend most of the two-day SED events during their 10-day visit, as the opening of US-bound tours is itself a product of past rounds of the SED.

Increased communication between the peoples of China and the US will help civilians in both countries to achieve a better understanding of each other and ease feelings of antagonism, which in the future will facilitate more rational discussion and decision-making between the Chinese and US governments. After three rounds of such cabinet-level meetings both sides now have more experience of negotiating with each other.

Exchange rates and financial reform, human capital exploitation, bilateral investment promotion, opening of markets, and cooperation on energy and environmental protection are all key issues for discussion during the SED. China's Wang made his SED debut with a lot to bargain for at the negotiating table, and the soon-to-be-leaving Paulson played fair.

Before the SED, some Democratic Congressmen had been asking the White House to address the problem of the undervalued yuan through the International Monetary Fund (IMF) and the World Trade Organization (WTO). However, Paulson noted that China deserved praise for its efforts on this matter as the yuan has appreciated by more than 20% since the 2005 exchange rate mechanism reform. Although Paulson is still concerned about the huge trade surplus between China and the US, he clearly knows that the accumulative appreciation of the yuan has already helped the US by slowing down China's exports. A weak dollar resulting from the economic downturn induced by the subprime crisis is key to the problem, removing any current incentive for Paulson to ask China for further appreciation of the yuan.