Chinese President Hu Jintao (R) meets with US Treasury Secretary Henry Paulson after the closing of the Strategic Economic Dialogue in Beijing's Great Hall of the People, Friday, Dec. 15, 2006.   Dec. 16 - The United States and China agreed during two days of talks here to narrow their huge trade imbalance but key points of dispute were not resolved, the chief delegates from each side said.

 

"We each will take measures to address imbalances, encourage greater national savings in the United States and to increase consumption and exchange rate flexibility in China," US Treasury Secretary Henry Paulson said.

 

Paulson brought six other members of US President George W. Bush's cabinet, plus Federal Reserve Chairman Ben Bernanke, to the inaugural "strategic dialogue," a forum aimed at easing deep trade tensions between the two nations.

 

Chinese President Hu Jintao told Paulson that the dialogue reflected mutual cooperation that was now at a "turning point," state television reported.

 

"We should handle the problems in our economic and trade cooperation through candid exchanges and friendly consultation and with a positive attitude," Hu was quoted by television as saying.

 

The United States urged China during the talks to take faster action on a range of reforms, with loosening controls on its currency, the yuan, among the most pressing of priorities.

 

"We have the point of view that there is more risk of going too slow. The Chinese see that differently," Paulson said.

 

In a speech in Beijing following the end of the talks, Bernanke issued another strong call for further flexibility in the yuan, saying such a move would help China's domestic economy as well as ease global trade imbalances.

 

Aside from the currency, other key issues raised by Paulson and his team were the copyright issues in China and the importance for it to continue to open up its markets.

 

The bottom line for the hoped-for reforms is to narrow the US trade deficit with China that threatens to hit a record 240 billion dollars this year.

 

Elaine Chao, the US labor secretary, said the two sides had discussed how to improve China's social system in order to persuade the Chinese that they could bring down their huge savings and consume more.

 

"We discussed how to develop a private pension plan and a government pension plan to boost the confidence of Chinese citizens to consume more, buy more US goods and create more US jobs," Chao said.

 

China's chief delegate, Vice Premier Wu Yi, characterized the talks as "highly useful" but emphasized the two nations could not find agreement on a range of issues.

 

"There were quite a number of areas of consensus but also quite a number of differences," she said at a joint press conference with Paulson.

 

"It's understandable that we would have differences because the US and China are two very different countries. The key lies in what attitude we take to embrace those differences."

 

The two sides announced the second strategic dialogue would be held in Washington in May, with officials stressing that this week's forum had helped lay the groundwork for future cooperation.

 

Paulson will have to return to Washington to face the increasingly strong protectionist lobby without having secured any solid commitments from China.

 

But the Treasury chief said the two sides were talking about broad, structural issues to which there are no speedy solutions.

 

"If you want immediate results, that's not realistic. We're talking about some of the very biggest issues here," he said.