By Ravi S. Narasimhan

There's an old saying in Texas, the home state of US President George W. Bush: If it ain't broke, don't fix it. And in Michigan, president-elect Barack Obama's home state (okay, they may now be trying to fix what is clearly broke), the gameplan when things were running well was: Make 'em bigger, and better.

So it is a bit perplexing that some Thomases who can't make up their minds in the United States are raising doubts about the continued well-being of the China-US Strategic Economic Dialogue, the fifth round of which began yesterday and ends today.

The dialogue was never meant to be about how many pieces of hosiery, or rolls of thin tungsten steel, were exported to the US at what was deemed a dumping price. Nor was it envisaged to be about the level of advanced technology - or Boeings - that China sought to bring down the trade surplus.

This was conceived as a holistic approach to address some - maybe many - thorny issues without any single one derailing the whole process between two key economies in the world.

In the four rounds of the dialogue before the current one, held roughly every six months, the diagnosis has been: Not excellent, quite satisfactory, keep the treatment going.

It's the prognosis which is worrying some: Naysayers in the US think the Obama administration should pull the plug on the dialogue mechanism because of their "failure" to persuade China to let its currency appreciate so that Chinese exports become dearer and so reduce the trade imbalance.

For the record, the Chinese currency has risen about 20 percent in the less than three years since it was depegged from the greenback. The appreciation has stalled only since July, but the currency has still risen about 6 percent this year. (There a number of foreign colleagues who are laughing all the remittance way to their banks, thanks to the rising yuan, but that's another story).

Of course, for every gain the yuan makes against the dollar, the lesser the value of China's holdings in dollar terms - because the country is the biggest holder of US debt. By September, China held $585 billion in US treasury bonds.

Forget about Scylla and Charybdis, image being caught between the renminbi and the greenback.

The negotiators at the SED are among the best and brightest in both the countries.

But just imagine a scenario where a special panel of the currency-value negotiating team meets:

US: You have to let the renminbi rise I'm from the Treasury Department's gains-and-losses special unit. My figures don't look good.

China: I'm from the People's Bank of China treasury bond sub-committee. Do you know how bad a hit we've taken? Every US Treasury bond we buy, we're going into the red.

US: So why don't you buy more stuff from us, not bonds?

China: What? Washing machines? Plasma TV sets? Chopsticks? How about something, like, you know, high-tech products?

US: Okay, you know I have to clear that with umpteen subcommittees but meanwhile, keep buying the bonds we have a deficit to finance, you know.

China: So get back to me whenever we'll do business.

Of course, in the real world, it's up to the main protagonists to seal the deal, or at least keep the ball rolling: Vice-Premier Wang Qishan and US Treasury Secretary Henry Paulson, who will soon leave his job.

Paulson is an old China hand who has contributed greatly to the success of the dialogue but his likely successor in the Obama administration, Timothy F. Geithner, is no stranger to the country.

He apparently speaks Putonghua fluently (unlike Paulson, who confesses he doesn't have a ear for languages).

So, let the dialogue continue.

E-mail: ravi@chinadaily.com.cn

(China Daily December 5, 2008)