Trade negotiations do not always take place behind closed doors. Opposing sides sometimes find it useful to fire a salvo and jockey for position by speaking into a microphone. Such was, presumably, the case with Tim Geithner, the US treasury secretary-designate, last week when he accused China of manipulating the yuan's value. We have not heard these charges levelled so loudly for a while, even though they are always in the air in Washington.
With his confirmation as America's Treasury chief in the balance, Mr Geithner found it necessary in his written reply to US senators to stake out a tougher-sounding position for the new Barack Obama administration on US trade with China. Predictably, this has sparked dire warnings about rising protectionism and an impending trade war between the two countries. But his comments are open to a more positive interpretation. Mr Geithner, who is expected to be confirmed this week, voiced his criticism when the Obama administration was only two days old. This signals the paramount importance the new United States president has placed on Sino-US trade relations, to which he must devote considerable attention. Trade is a key component of a bilateral relationship that is likely to be the most important in the world in the 21st century.
Many in China have dismissed Mr Geithner's remarks as mere rhetoric, something every new US administration has engaged in until economic realities hit them. It may be just that. But neither country can go back to business as usual as a result of the global financial meltdown.
The Sino-US trade regime that pre-dated George W. Bush's presidency and expanded a lot during it benefited both sides. It enabled China to emerge as a global manufacturing powerhouse. Meanwhile, America completed what has been called the 'financialisation' of its economy. Under Mr Bush, the finance, banking, insurance and real estate sectors together rose to represent more than a fifth of US gross domestic product, while once mighty American manufacturing contributed less than 13 per cent. Millions in China had work and Americans' purchasing power was artificially boosted as they bought cheap Chinese-made goods and ran up ever more debt. China's massive purchase of US government debt helped to keep US inflation and interest rates low. The situation helped hold down the yuan's value, thereby keeping Chinese exports flowing. But these convenient arrangements contributed to the credit and housing bubbles in the US, and like them, have now come to an end. Chinese manufacturing output and exports are shrinking at an alarming rate; the US financial sector is in tatters.
Yet instead of dumping US Treasury bonds, China has bought more during the current global crisis, surpassing Japan to become America's biggest creditor. This has to be seen as a sign of goodwill at a time when all other investable asset classes have crashed and US government debt has, alone, experienced a rally. The circumstances presented a perfect opportunity for Beijing to offload some investments - but it has resisted the temptation.
The two nations need a new trade regime but, as yet, no one knows how it will turn out. A trade war would be the worst possible outcome. Let us also hope both countries will evolve a more balanced trade system to avoid another cycle of boom and bust. For on it depends the future of Sino-US relations, and the health of the global economy.