As of 2009, the China-U.S. Strategic Economic Dialogue was elevated from ministerial level to cabinet level and renamed the China-U.S. Strategic and Economic Dialogue. Zhou Wenzhong explained why: "The dialogue had previously been presided over by the U.S. Treasury Department but when President Obama took office and appointed Hillary Clinton as Secretary of State, she suggested the dialogue be upgraded, and that it be presided over by herself and the treasury secretary jointly. Before that, there had been a bilateral dialogue on political and security issues at the level of deputy foreign affairs ministers. Clinton suggested the two dialogues be merged. Therefore, starting from the Obama administration, the China-U.S. Strategic Economic Dialogue became the China-U.S. Strategic and Economic Dialogue. It is held annually. Although the title of the dialogue changed, content continuity was maintained." On July 27, 2009, the first round of S&ED was held in the United States at two venues. Co-presiding over the strategic dialogue was Chinese State Councilor Dai Bingguo and U.S. Secretary of State Hillary Clinton; the economic dialogue was led by Chinese Vice-premier Wang Qishan and U.S. Treasury Secretary Timothy Geithner.

In the history of Sino-American relations the S&ED is the venue of the highest stature, covering the most fields with the broadest scope. Zhou Wenzhong summarized its functions: "Through the dialogue, China and the United States, two countries that contribute greatly to global economic development, have strengthened their coordination of macroeconomic policies, and negotiation and coordination on concrete disputes in economic relations and trade. Now the world is concerned with the issues of global economic governance and financial supervision. China's involvement and the coordination of the Chinese and American policies are very important to progress. All these issues had appeared on the agenda of the China-U.S. Strategic Economic Dialogue before the G20 came to handle them. As regards problems not amenable to quick solutions, both sides strengthened control through the dialogue, so that such unresolved issues would not affect the overall situation of bilateral economic relations and trade. The dialogue has played a key role in solving concrete trade disputes and in promoting the steady development of bilateral economic relations and trade."

Before the launch of the dialogue, the issue of RMB exchange rate was highly politicized by the American side. It was widely believed among senators and congressmen that an undervalued RMB was a government subsidy to exports, and they demanded that an extra tax should be levied equal to the amount by which the RMB was undervalued. The diplomat remembered this time clearly: "Senator Schumer of New York and Senator Graham of South Carolina brought forward a bill, demanding a levy of a 27.5 percent additional tax on Chinese exports to the United States. Had this bill been adopted, there would have been a trade war between us." Thanks to the mechanism of open discussion, the RMB exchange rate issue was kept under control even if not totally resolved.

"Through thorough communications, the U.S. Treasury Department's annual exchange rate report didn't conclude that China manipulated its exchange rate, and thus fiercer conflicts on the issue were avoided," said Zhou Wenzhong.

In Zhou's view the JCCT mechanism still works and plays an important role even after the initiation of the S&ED. For example, American business circles think China is altering its opening-up policy and imposing more and more restrictions. This needs an explanation. Furthermore, both sides need a high-level mechanism for face-to-face coordination on a series of specific issues such as intellectual property protection, government procurement, and issuance of 3G permits. He says that the S&ED and JCCT are complementary, playing an indispensable role in stabilizing China-U.S. economic relations and trade.

Promoting Financial Cooperation

After the establishment of diplomatic relations in 1979, bilateral issues in specific fields were handled by three joint commissions, respectively devoted to commerce and trade, science and technology, and the economy. The JCCT was the highest level, responsible for issues of trade in commodities and services, but it never covered banking, finance and insurance. "Obviously, the American side wanted to include fields such as banking and finance; with increasing financial cooperation becoming necessary, many problems arose. China was also keen to launch this dialogue; there'd long been a disparity in the number of American banks in China and the number of Chinese banks in the United States. We wanted a mechanism where we could negotiate solutions with the American side," said Zhou Wenzhong.

In step with the reform and opening-up process, China started to open up its financial market in the late 1970s. In 1983 China passed and implemented Regulations on the Establishment of Resident Representative Offices in China by Overseas Chinese and Foreign Banking Institutions. It was the first legal instrument to prepare the way for the entry and operation of foreign financial institutions in China.

As symbolized by exchange rate reform and foreign exchange restructuring in 1994, China's financial industry entered the stage of marketization and internationalization. Soon RMB became convertible under a current account; a new basic framework of foreign exchange system was established; and foreign financial institutions were allowed more choice as to where they could operate and the types of financial services and products they could offer throughout China.

With the Asian financial crisis in 1997, there was an across- the-board slowdown in the global economy, international investment and capital flows, and inbound flows of foreign capital. At the same time though, the pace of negotiations on China's joining the World Trade Organization (WTO) quickened. The domestic financial industry, banking in particular, began preparations to cope with the foreign banks that would stream into China. Since joining the WTO in 2001, in accordance with promises it made in the negotiations, inclusion has expanded to foreign banking, insurance and securities industries, sequentially controlled. Recently, China's financial industry has been accelerating its opening-up, and is implementing the policy of full access. According to incomplete statistics, six American banks have established 30 branches in China, including Citibank, JP Morgan Chase, Morgan Stanley International, East West Bank, Wing Hang Bank, and GE Capital Co.