The third Sino-US strategic economic dialogue, held in Beijing last week, achieved more concrete results than many expected. There was a good reason why the latest talks drew little fanfare. Both Vice-Premier Wu Yi and US Treasury chief Henry Paulson are on their way out. And certain moves taken by the United States - such as the Dalai Lama receiving an award from the US Congress during the Communist Party's 17th National Congress - raised the level of suspicion and caution in Beijing.
Surprisingly, both parties focused on real issues such as market opening, the environment, food safety and bilateral co-operation. Gone was the never-ending debate on revaluing the yuan seen in previous sessions.
Meanwhile, the People's Bank of China accelerated the pace of the yuan's appreciation against the US dollar in the run-up to the talks. The exchange rate ended at 7.36 yuan to the dollar last week. But, make no mistake, the likelihood of a second revaluation by Beijing is extremely slim, even though the central government seems to have drastically increased its efforts to cool the economy. The main reason behind the reluctance to engineer another one-off adjustment is that leaders in Beijing are aware that conventional monetary tightening is unlikely to slow the economy sufficiently.
That is why the most recent rise in the reserve requirement rate - the amount of money banks are required to hold in reserve - was not accompanied by interest rate increases.
The rationale was that, given the inefficient financial system, credit controls would be more effective in curbing unwanted investment. For the same reason, yuan revaluation is viewed as a poor policy choice compared to allowing greater capital outflow.
In a recent article in the Beijing-based business magazine Caijing, Hu Xiaolian , deputy governor of the People's Bank of China and the head of the State Administration of Foreign Exchange, argued eloquently that using foreign capital more efficiently and easing controls on overseas investment would remain the key tools for mainland China in reducing its current-account surplus.