Next week the first meeting under the Obama administration of the United States-China Strategic and Economic Dialogue will be held in Washington. China will inevitably push Washington to protect Chinese assets in the United States by following policies that will ensure the basic stability of US dollar exchange rates. China is Washington's single biggest creditor with USD801.5 billion in Treasury securities, and is worried that large US stimulus spending will spark inflation that will wither China's holdings of debt.

Yesterday, US Federal Reserve chairman Ben Bernanke reported to Congress that the central bank is confident that it can handle possible spikes of inflation as recovery is on the cusp. The US and China are hoping to work together through the meetings next week, also producing agreements to promote trade and oppose protectionism.

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