In the absence of a breakthrough, members of the US congress have vowed to pass laws to penalise China, and a proposal to cite it as a currency manipulator in the next congressional report on trade, a move that could lead to economic sanctions.
 
US manufacturers claim the yuan has been artificially undervalued by as much as 40 per cent, making Chinese exports unfairly cheap and American goods costlier in the Chinese market.
 

"I believe it would be in their interest and the rest of the world's interest for them to move more quickly"

Henry Paulson,
US treasury secretary

Last Friday China announced it would allow the yuan to fluctuate more on a daily basis, but critics dismissed the move saying it was not enough to meet US demands.
 
Henry Paulson, the US treasury secretary, told the visiting Chinese delegation that a perceived foot-dragging on the pace of reforms was causing a growing anti-China feeling among some US politicians.
 
"I believe it would be in their interest and the rest of the world's interest for them to move more quickly," he said.
 
Despite the lack of substantial progress at the talks, Paulson and Wu Yi, the Chinese vice premier, both sounded positive notes on the importance of the discussions, pointing to "tangilble results".
 
Wu called the high-level meeting "a complete success", but added that it was important to continue direct consultations instead of resorting to "threat and sanctions".
 
'Frank dialogue'
 
The US says the yuan is undervalued 
against other currencies [GALLO/GETTY]
Also on Wednesday the Chinese trade delegation, the largest high-level team ever to visit the US, held talks with congressional leaders on a range of trade and political issues.
 
Afterwards Wu said only that she had a "very good" discussion with Nancy Pelosi, the House Speaker, among others.
 
Pelosi said she and Wu had an "open and frank dialogue" on a wide range of issues including product piracy, currency dispute, genocide in Darfur, and human rights in China and Tibet.
 
"I believe the Chinese government can do more in each of these areas," she said.
 
Charles Rangel, chairman of the House Ways and Means committee, said the Chinese team had wanted more time to implement reforms including overhauling their currency system, but he said his committee would go push ahead with laws intended to step up pressure of China.
 
Other issues raised during the talks were food safety, for which more meetings were planned, market access for US financial services and the frequency of passenger and cargo flights.
 
Both countries agreed to more than double the number of daily passenger flights by 2012, with an increase in cargo flights.
 
In the financial services sector, China agreed to a slight expansion in business opportunities but refused to lift the caps on foreign ownership of banks, securities firms and insurance companies sought by the US.
 
'Too slow'
 
US business groups had a more downbeat response to the outcome of the meetings.
 
"The Chinese must realise that the risk now lies in acting too slowly rather than acting too rapidly, not just in trade, but in addressing their own overheating economy," said John Engler, president of the National Association of Manufacturers.
 
The US Business and Industry Council, which represents small and medium-size manufacturers, said the Bush administration should scrap the dialogue process, launched last year by the US and Chinese presidents, based on the poor results so far.
 
"It's clear that this dialogue has been nothing but a cynical Bush administration exercise in spin and public relations," said Kevin L Kearns, its president.
 
"The failure of the White House's approach is now clear, so the ball is clearly in congress' court."