Paulson To Prod China on Currency

The proposed Asia Fund goes far further than previous regional initiatives and in certain cases could replace IMF assistance.

Teng Tai, chief economist for China Galaxy Securities, said Asian countries have been frustrated with the IMF because the "IMF makes decisions by a vote mechanism that favors the U.S."

"Asian countries found, that when they got financial aid or a loan from IMF, many rider clauses [were] good for American interest but not for theirs," Teng said.

Manasvi Srisodapol, deputy director-general of Association of Southeast Asian Nations affairs for Thailand, added, "Asian countries feel that if any Asian country suffers from a financial crisis, the countries in the region should help each other out. The idea is a self-help measure." But he cautioned that discussions about the fund were preliminary.

At this week's meeting in Beijing, Paulson said he additionally plans to discuss the commitments already made by the two countries to environmental protection and the development of energy-efficient technologies. The United States and China are the top two consumers of oil in the world.

Also on the agenda is the future of the dialogues once the new U.S. administration takes over in Washington. China's assistant minister of finance Zhu Guangyao said this week that Beijing hopes the high-level talks will continue but needs to "discuss with the Obama administration on whether the dialogue's name and contents should be changed."

Part of the success of the dialogue is the close relationship between former Chinese Vice Premier Wu Yi, China's "Iron Lady," and Paulson. The two have helped their governments hammer out agreements on some of the touchiest issues in U.S.-China relations: the food and product safety crisis in 2007, intellectual property, clean energy cooperation. But progress during the talks seemed to stall when Wu retired last year and Wang Qishan took over her post.

President-elect Barack Obama's new Treasury secretary, Timothy F. Geithner, has had a strong interest in China since boyhood, when his father served as an Asia expert for the Ford Foundation. Geithner studied Chinese at Dartmouth University and spent at least one summer in China.

"Private relationships between top economic leaders did play a critical role in the process of the Strategic Economic Dialogue," said Sun Zhe, an expert on Sino-U.S. relations at Tsinghua University in Beijing. However it's unclear what the chemistry will be between Geithner and Wang.

"For Geithner and Wang, there is a difference in their ages," Sun said. "Their backgrounds are also different. Geithner is a typical technical official, but Wang once was provincial governor."

However, Sun added that even though he is "not sure if they will set up good private relationship, their work relationship should be good" because it is in their mutual interest to collaborate.

Cha reported from Chiang Mai, Thailand. Researchers Liu Songjie and Liu Liu in Beijing contributed to this report.