On the eve of the G7 summit meeting, representatives from China and the US gathered in Washington for the 16th US-China Economic Forum to discuss the trade deficit and the growing dispute over the RMB exchange rate. At the close of the meeting, China reiterated its commitment to "push ahead firmly and steadily" toward a more flexible exchange rate, but refused to set a timetable for when the shift toward a market-determined rate might occur. America restated its case for currency adjustments aimed at reducing the ballooning trade deficit, and pointed out what it sees as inaction on the Chinese side.

The Chinese exchange rate has been pegged at 8.3 to the dollar since 1995, and calls to float the currency have grown considerably since the G7 first began pressing for more flexibility in September 2003. Both the US and Japan claim that the RMB has been deliberately depressed, resulting in an unfair advantage for Chinese producers in markets abroad. A group of US manufacturers and lawmakers recently sent a formal petition to President Bush's trade office demanding that a complaint be filed against China at the World Trade Organization. The US Under-Secretary of Commerce rejected the petition saying that such punitive measures would not solve the problem. A spokesperson for the US Treasury Department also responded by affirming the progress that China has made in recent years toward a flexible exchange rate.

Sources present at the meeting in Washington confirmed that the US pressured China to review its currency exchange policy to avoid further damage to US manufacturers. The Chinese insisted that their ultimate goal is a market-based exchange rate, but that stabilizing the banking system remains their first priority.