updated 5/24/2007 9:10:42 PM ET 2007-05-25T01:10:42

President Bush told a senior Chinese economic minister Thursday that the United States is “watching very carefully” whether Beijing will strengthen the value of its currency.

After a meeting with Vice Premier Wu Yi, the leader of the largest high-level Chinese delegation ever to visit the United States, Bush told reporters the United States is “making it clear to China that we value our relationship, but the $233 billion trade deficit must be addressed.”

Strengthening China’s currency, he said, is one way to deal with the deficit.

“This is a complex relationship,” Bush said. “There’s areas where there’s friction, and we’ve just got to work through the friction.”

High-level economic talks Wednesday between Wu’s delegation and senior Bush administration officials failed to reach a breakthrough in the countries’ biggest dispute: China’s undervalued currency.

Wu met Wednesday and Thursday with frustrated congressional leaders, many of whom are considering legislation that would punish Beijing for trade practices they say drove the trade deficits to record levels and cost the United States thousands of manufacturing jobs.

After talks Thursday with Wu, Sen. Harry Reid, leader of the Senate’s Democratic majority, warned that “if China and the Bush administration won’t take action to bring about more balance, there is growing sentiment in Congress to act.”

Sen. Debbie Stabenow, D-Mich., said after another private meeting Thursday, “We spent a lot of time on currency manipulation, and they spent a lot of time trying to convince us that things are getting better.”

Stabenow said that at one point one of Wu’s ministers urged the U.S. side to be patient. “I said, ’People in Michigan are losing their jobs because of the violation of the trade laws, and it’s very difficult to be patient when you’re losing your job,”’ she said.

Zhu Guangyao, assistant Chinese finance minister, told reporters that Wu stressed in her talks with Congress that it would be “inappropriate to use non-economic means” to solve differences, referring to retaliatory legislation.

Bush, in his comments, urged China to open financial markets to U.S. companies and to allow U.S. beef imports. “They need to be eating U.S. beef. It’s good for them. They’ll like it,” he said.

China has rejected U.S. requests that it accelerate the revaluing of its currency, the yuan, which American manufacturers contend is undervalued by as much as 40 percent. That makes Chinese products cheaper for Americans and U.S. goods more expensive in China.

Despite the congressional criticism, both Wu and Treasury Secretary Henry Paulson, head of the U.S. delegation at the talks, sounded positive about the importance of the new high-level “strategic economic dialogue” between the countries, which occur twice a year.

A Chinese business delegation visited 24 U.S. states on an investment and procurement mission and agreed to contracts totaling more than $32 billion, Zhu said.

The delegations on Wednesday agreed to more than double the number of daily passenger flights between the two nations by 2012, going from 10 to 23. Cargo flights also were increased. The gains, however, fell short of the openings the Bush administration had hoped to achieve.

In the area of financial services, China agreed to a slight expansion in business opportunities for U.S. companies but not to the lifting of caps on foreign ownership of banks, securities firms and insurance companies that U.S. firms had sought.

For her part, Wu said it was important to continue direct consultations between the two nations rather than resorting to “threat and sanctions.”

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