US Treasury Secretary Henry Paulson kicks off his 'economic strategic dialogue' in Beijing this week, adding a new dimension to Sino-American engagement. His entourage is probably the strongest negotiating team ever thrown at Beijing, including the secretaries of commerce, trade, health and the environment.
As an investment banker with long experience in China, Mr Paulson brings fresh pragmatism to a presidential administration whose theoretical, Alice-in-Wonderland approaches to world issues have left a legacy of sad results. By creating a multi-dimensional approach to negotiating, he echoes the thinking of other China-hand business kingpins like George Fischer, former chairman of Eastman Kodak Corp. Mr Fischer used a similar approach in the 1990s to open the mainland's once tightly guarded film sector, giving America the market lead.
China clearly anticipates that the issue of the yuan's value will be raised by the visiting Americans. Beijing telegraphed its position last Wednesday, on the front page of a newspaper owned by the central bank: it explained why the yuan should be devalued rather than strengthened.
With China holding over US$1 trillion in foreign-exchange reserves, this argument seems far-fetched. China's export-engineered, hyper-growth economic model, however, could face shocks from oil prices and a lack of the management capability needed to progress to the next stage - higher-end production.
If such factors drive up costs, the mainland may become less attractive as a manufacturing base for multinationals. The Nike sportswear firm recently announced it was shifting a quarter of its production from China to Indonesia.
If that becomes a trend, it would draw into question the sustainability of an equation in which America's deficit is being financed by China's purchase of US Treasury bonds - to lock foreign-exchange reserves into a secure holding. Meanwhile, those same reserves are boosted through the sale of cheap products to Americans on the back of loans from China's insolvent banks. This dangerous situation is one of the greatest pyramid schemes in the history of financial architecture.
Mr Paulson has said clearly that even a 20 per cent yuan appreciation will do nothing to save American jobs. The future of American jobs will depend on economic adjustments and industrial restructuring. More importantly, it will require federal spending on educational and vocational programmes in urban backwaters, rather than sending undereducated Americans to war as a means of removing them from future welfare rolls.