'Hank the tank' is back, and this time he is bringing his buddies. The firmament of senior officials accompanying US Treasury Hank Paulson on his second trip to China in three months underscores the significance Washington now places on its financial and trade relations with Beijing. As one high-ranking Treasury department officer put it ahead of Mr Paulson's first official trip in September: 'The US-China economic relationship is one of the most important, if not the most important, relationships in the world.' The time and effort Washington is investing in talking to Beijing is welcome, as is the US administration's new, more conciliatory language. Despite the combative nature implied by his US media nickname, Mr Paulson is stressing co-operation rather than confrontation. His approach contrasts sharply with that of his predecessor John Snow, who once threatened to hold China's feet to the fire in negotiations. Even so, despite the promising signals, it would be a mistake to expect any major breakthroughs from this week's talks. There will be some progress. It is likely China will agree to crack down further on abuses of intellectual property rights. Beijing may also make positive noises about opening its domestic services sector to more foreign competitors. But the big prize that Washington would dearly like to win - a substantial appreciation of the yuan against the US dollar - will remain out of reach. Just in case anyone doubts this, a Chinese central bank official this week declared that the country's exchange rate is a matter of national sovereignty, implying that the subject is out of bounds for foreigners. Mr Paulson understands Beijing's sensitivity. Before his last trip, Treasury officials stressed they are not in the business of analysing exchange rate valuations. Rather than pressing explicitly for a big upward move in the yuan, they will call on Beijing to allow market forces to play a greater role in setting China's exchange rate. Here, they are likely to have more success but not much more. Chinese officials are eager to dispel any notion that the yuan is a one-way bet and to encourage better risk management in the domestic banking sector. As a result, they are keen on allowing the exchange rate a little more room to fluctuate on a day-to-day basis and have hinted they will soon widen the yuan's permitted daily trading band. But even if they do allow more short-term volatility, it will still be Beijing that determines the value of the currency over the long run. This does not mean China will entirely rule out a more rapid appreciation of the yuan against the US dollar. Indeed, Chinese officials can argue this week that they are already allowing the yuan to rise more quickly against the greenback. Over the past six months, the average annualised rate of appreciation has doubled to about 6 per cent (see chart). But Beijing is comfortable with this rise, partly because the US dollar has itself been falling against other major currencies. As a result, despite the 6 per cent rise in the yuan against the US dollar since July last year, the yuan today is worth the same on a trade-weighted basis against a basket of currencies as it was in mid-2003. Do not expect the situation to change much. As long as Beijing's main policy goal is to maintain internal social stability, China's policy-makers will do nothing that threatens the job-creating potential of the country's export sector nor anything that exposes its agricultural sector to cheap foreign imports. That means preserving the trade-weighted competitiveness of the yuan, whatever Hank the tank and his pals might say this week.