They're going there to ask for more support for US treasury bonds , a stronger yuan and in exchange they will offer lesser constraints on chinese exports and try to make the case on a stronger US economy being the key for increase in chinese export to the US .
I'm not saying the Chinese will agree with the argument as they grow weary about the US dollar and frustrated with growing protectionism against chinese export to the US but they surely are conscious of international worries about the yuan as well as international protectionism in western countries hitting chinese exports .
China as been agressively pushing interior demand this year and even though they fear the impact on exports that could cause a stronger yuan they know the next major step will eventualy be to rise the value of the yuan , they will want to control that rise in steps when comes the time and it may be easier to do if they start earlier and extend through a longer period of time on a schedule of their own rather then wait untill pressure mounts internationaly to the point of forcing their hand in making sudden moves .
I think we'll start seing the yuan move up slowly and gradualy though 2010 maybe up to 20% of it's actual value against most major currencies .
As for their support of US treasury bonds they can hardly risk letting their holdings in US denominated dollar go down too much wich is true for Japan as well as most other rich countries , they're is just not enough gold out there for everybody to switch to such an extent as to compensate for a much lower decline in the value of the US dollar . Sooner or later comes a point where they have to support the US dollar like they did on the currency market recently .
Raising the value of the yuan will be a case of compromising on either having to cope with increase protectionism hitting their exports or a reduction of their exports cause by a stronger yuan , in both case China will have to cope with weaker exportation over a period of time as is presently the case this year and they may loose less with a stronger US economy and a stronger yuan then they would with a week US and international recovery while retaining a low value yuan and having to deal with protectionism , i think that will be the case Obama and Geithner will try to make going to China .
China will have to further stimulate consumer spending in order to compensate for the loss in exportation wich should be to the advantage of the recovery internationaly while helping growth in western countries as well and help the cause of the US dollar further down the road .
In any case the US rate of unemployment puts a lot of pressure on the US budget and the only solution is growth in revenues and lower spending and that can only come with a growing economy throug a rise in exports and a stronger US dollar at some point , people have to work in order to spend and get off the US government payroll , and a stronger dollar will encourage investment in the US eventualy .
Regards!
Tec
