Paulson met with China's central bank governor Zhou Xiaochuan at the annual meeting of the International Monetary Fund in Singapore earlier this week.

"Of course the renminbi issue will remain one of the major interests for US officials like Paulson and should be discussed with the Chinese side during the visit," said Wang Yuanhong, an economist at the State Information Centre.

But going on previous communication, neither side is in a hurry to reshuffle the renminbi exchange rate scheme. And it should be obvious to Paulson, given his understanding of China, that a drastic appreciation of the renminbi will bring little resolution to China's trade surplus with the United States, Wang said.

Before he left for China, Paulson said in Singapore on Monday that moving toward a freely traded currency is in China's interests. But, "I am not looking for immediate solutions or quick fixes ... I am looking to set a tone and an expectation of working through issues and making progress," he told reporters.

Zhou Xiaochuan also made it clear in Singapore that China is gradually moving toward a flexible exchange rate regime.

The renminbi, or yuan, reached its strongest level against the US dollar yesterday since China appreciated the currency by 2 per cent in July 2005 and linked it to a basket of foreign currencies instead of to the US dollar alone. The central bank set the daily reference rate for the yuan at 7.9342 when traded against the dollar yesterday, compared to 8.11 upon last year's revaluation.

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