plays a positive and constructive role in keeping the system intact.

Where does the stake lie?

A country has its stake just like a company does. China receives dividends, or benefits. When it joined the WTO, your foreign trade exploded, and your exports exploded. That is beneficial for all the people in China. That is the trend.

There is no denying that some problems remain in current Sino-U.S. economic relations, especially bilateral trade. What are the major ones in your opinion? What measures do you think the two countries should take to solve these problems?

There are some problems in the trade area. Particularly you can see in the United States that the public and representatives in Congress are questioning the benefits of the free trade system. Our president believes in free trade, but the rest are losing a consensus about the benefits of free trade. They argued that we have not received the benefits of the system.

According to our statistics, I know you have different statistics, we had a bilateral trade deficit of $162 billion in 2004. Never in the history of the world has there been such a big deficit. And after a year, I don? know what kind of statistics you have, it exploded to $201.6 billion. This is unsustainable, particularly when the perception is that China obtained this kind of trade surplus by unfair means.

The focus is that people think that the value of the renminbi yuan does not reflect its true market value. Market access to China is still an issue, in some industries and in some areas.

Finally, a big problem lies in intellectual property rights (IPR). In the United States, a big percentage of our GDP comes from services and IPR. That's where we have a competitive advantage, in innovation, in ideas and products where we have the essential IPR. In China, the law is good but the enforcement is not consistent or effective. It appears that IPR piracy is a serious problem.

We can see that Chinese Vice Premier Wu Yi is taking charge of a leading group [for IPR protection in China] and efforts have been made. So, we are hopeful that those efforts can continue and we are hopeful to see an impact in the marketplace.

You used to work for a law firm in Hong Kong. I believe you know a lot about the Chinese economy and stock market. Do you personally believe that the value of the renminbi yuan against the U.S. dollar is pretty low? What do you think is the fair level?

(Laughs) I have no idea. Only the market knows. You know, some people say this and some people say that. We think only the market can tell us. You have a truly flexible exchange rate mechanism, and then the market will set it.

You have followed the development of Chinese enterprises for more than 20 years. Quite a number of Chinese enterprises are extending their operations to foreign countries, including the United States. How do you perceive such a trend?

It's positive. The United States is practicing on the global capital market. The deepest and richest capital market can give our investors more choices and more options. That's an opportunity for American investors. Also we welcome international investors. Many people are investing in the United States. It brings opportunities.

I know a lot of American people are complaining about losing jobs since Chinese companies set up operations in the United States. Some people in the government and Congress maintain a negative attitude toward extending operations in the United States.

I want to assure you that the Bush administration welcomes foreign investment in the United States. There have been some recent highly publicized cases, but those are really exceptions.

Chinese President Hu Jintao is paying an official visit to your country this month and holding talks with President Bush. What are the major issues you think the two presidents are going to discuss?

This is President Hu's first visit to our country as president. So, it is a very important visit and we will have a lot of strategic programs, and the visit will have a deep impact on the relationship of the two countries. There is an excellent potential to move our relations to a higher level. A lot of people say the relationship between the United States and China is pretty good. But it can always be better. We wiill never be satisfied. I think this visit can move us to an even higher level of cooperation.

There are certain global issues that the two presidents will discuss. China played a constructive role on the North Korean and Iranian nuclear issues and on all sorts of other issues ranging from avian influenza to the environment and energy policy. We have a lot of issues on which we share common interests. Of course, we have differences like the trade issues. We will discuss those.

Our president and the American people think human rights are very important to us. That does not say we are perfect, but we are very proud of our culture. We can all improve.

Besides agreements for China to purchase U.S. products, are you expecting any agreements in other areas? Will the two countries sign a joint document on overall bilateral relations?

I cannot predict what agreements might come out. We did have [Homeland Security] Secretary Michael Chertoff pay a very constructive visit, meeting State Councilor Zhou Yongkang and Luo Gan, a member of the Standing Committee [of the Political Bureau of the Communist Party of China Central Committee].

I think there are a number of very positive agreements to be signed [during President Hu's U.S. trip].

I notice you did not mention Taiwan among the topics to be discussed by the two presidents.

We never have to raise it (laughs) because our Chinese friends always refer it to us. Certainly the president is prepared to discuss our "one-China policy."

You are the longest serving U.S. ambassador to China so far. When you first arrived in Beijing as the ambassador in July 2001, you quoted an old Chinese saying to reflect your aspirations for the future of U.S.-China relations--"bo yun jian ri" (to remove the clouds and to see the sun). Almost five years have passed since then. What old Chinese saying would you like to quote to reflect your current aspirations for the future of Sino-U.S. relations?

"Yu qiong qian li mu, geng shang yi ceng lou". (Ascend another story to see a thousand li (a Chinese unit of length that equals half kilometer) ahead, or to have a better view.)

That's Deng Guan Que Lou (To Climb Guanque Tower) written by Wang Zhihuan, a well-known Chinese poet (688-742) of the Tang Dynasty (618-907).

Yes. I think things are going in the right direction. The relationship is improving. Again thanks to the efforts of our leaders. It [the bilateral relationship] has the potential to keep growing.