As Appreciation of China Currency Slows, Manipulation Remains an Issue WASHINGTON - The pace of appreciation of the Chinese currency against the dollar has slowed in the last year, ensuring that China's manipulation of its exchange rate remains a central topic as Treasury Secretary Timothy F. Geithner arrives in Beijing for the annual dialogue between the nations. While praising the Chinese government for its progress, Treasury officials have promised to maintain the pressure. "The process of correcting the misalignment of the exchange rate remains incomplete," Mr. Geithner said in a speech in April. The Chinese currency needs to appreciate further against the dollar and the other major currencies. The Chinese government has been holding back the pace of appreciation, which makes Chinese goods relatively more expensive and American goods relatively cheaper. With bond yields spiraling in Italy and Spain last winter, the World Bank and International Monetary Fund warned of recessions across Europe, sluggish growth in the United States and Japan and the possibility of hard landings in fast-growing emerging economies, like China's. Economic issues have been overshadowed by diplomatic ones in advance of Mr. Geithner's meetings Thursday, which will include Secretary of State Hillary Rodham Clinton and officials from the upper echelons of the Chinese government. Last week, Chen Guangcheng, a blind human rights lawyer, escaped from Chinese security forces and sought refuge in the United States Embassy in Beijing. On Wednesday, he left the compound, but his fate remained unclear. A senior administration official in the American delegation, who spoke on the condition of anonymity to avoid disturbing diplomatic relations, said that the incident had not seemed to disrupt the economic dialogue, even as it had taken some attention from it. Officials on both sides, who had spent about two months negotiating before the meetings, were determined to pursue their respective agendas, and early sessions were congenial, the administration official said. "Both sides are bending over backward to not make strong statements about the issue," said Nicholas R. Lardy, a China specialist at the Peter G. Peterson Institute for International Economics, a Washington-based research group. Mr. Peterson said in a call with reporters that he expected open talks but little progress. Mr. Geithner's central goal is to encourage changes to make the Chinese currency and financial systems more responsive to market forces, with exchange rate and interest rate controls as main points of American concern. The renminbi has appreciated about 30 percent against the dollar since 2005, adjusting for both economies" rates of inflation. Beijing had halted the currency appreciation during the financial crisis from summer 2008 to mid-2010 to help increase the competitiveness of Chinese exporters and maintain China's rapid pace of economic growth. But the government allowed the currency to resume its upward drift in 2010, to applause from the Obama administration. The rate of appreciation initially spiked. But about 18 months ago, it started to fall, and the currency remains too cheap relative to the dollar, according to the Congressional Research Service. The American official taking part in the dialogue said that in response to the widespread worries, the Chinese government might have halted the renminbi's appreciation or even allowed the currency to fall in value relative to the dollar over the winter. But that did not happen, the official said, for which Washington gave China's government credit. Moreover, last month the Chinese central bank widened the currency's trading band to a daily range of 1 percent from a range of 0.5 percent, letting market forces play a bigger role in determining the value of the currency versus the dollar. The appreciation of the currency and other changes by the Chinese government have started to rebalance the country's economy. China's current-account surplus, a measure of how much more the country exports than it imports, fell to less than 3 percent of economic output in 2011 from about 10 percent in 2010. Its trade surplus has fallen as well. And as the government has eased certain controls, more Chinese companies are investing overseas. But an International Monetary Fund report released in April warned that the changes have not been a result of increased consumption as a share of Chinese economic output, which the fund and the Obama administration describe as vital for the world economy. Instead, the results were because of trade and currency dynamics. "Sustainable rebalancing will depend on China's successful transition from investment-led to consumption-led growth," the report said. The official said that given the brightening global outlook, Washington expected the currency appreciation to continue, and would press for that and a variety of economic and financial changes at the meeting. In the April speech, Mr. Geithner focused on changing China's financial system: loosening state controls on interest rates, leveling the playing field so that private companies can compete with China's state-owned enterprises and allowing the value of the renminbi to be determined by market forces. Progress on the currency issue is expected to be slow but consistent. "For so long, that's been the flash point in the bilateral relationship," said William R. Cline, a former Treasury official now at the Peterson Institute. But the global recession seemed to convince China that absolute reliance on exports for growth was a "risky strategy," he said. The administration has applauded China's efforts to let its currency appreciate, but it remains a hot-button issue in Washington. The Senate last year passed a bill punishing China for undervaluing its currency but the bill never passed the House. Moreover, Mitt Romney, the presumptive Republican presidential candidate, has repeatedly promised on the campaign trail to name China as a "currency manipulator," a term the Obama administration has avoided.