In a statement, Bush said: "President Hu and I agree on the importance of maintaining strong and mutually beneficial US-China economic relations, and on the need to establish an overarching bilateral economic framework between our two countries."

"The relationship between the United States and China is the most important bilateral economic relationship in the world today," Paulson told a news conference here.

"That is why we have created this unprecedented dialogue," said the Treasury chief, who is paying his first visit to China since taking office in July after seven years as boss of Wall Street giant Goldman Sachs.

Paulson denied that the US government was abandoning its pressure on immediate irritants such as China's exchange rate, market access and fake goods.

"I would not want to predict when there should be results," he said, "but I'm not famous for being a very patient man."

The newly launched dialogue will help promote bilateral understanding between the two economic giants, Wu said at the public launch of the initiative alongside Paulson in Beijing's Great Hall of the People.

"It will also have a positive impact on the development of the world economy as well as on global stability and security," she said.

The world's biggest economy and its fastest-growing one already have a plethora of existing forums to discuss specific economic and geopolitical issues, including an annual consultation on trade disputes.

But they said the new "strategic dialogue" would move beyond the tensions of the day to look at the fullest picture of their trade and financial relationship.

Headed by Paulson and Wu, it will meet twice a year, alternating between the US and Chinese capitals with each president taking part in turn. The first session is expected to take place in Beijing before the end of 2006, US officials said.

They said the idea came from Paulson after he became Treasury secretary. Bush then telephoned Hu on August 21 to give his personal stamp to the proposal, and the Chinese came round in less than four weeks.

That could reflect their desire to placate anger in Congress over their trade practices as US lawmakers gear up for elections in November.

Critics argue that the yuan is undervalued by as much as 40 percent against the dollar, giving an artificial boost to Chinese exports at the cost of millions of American jobs.

Without meaningful yuan reform, the US Senate could vote as early as next week on a widely backed bill that would slap a punitive tariff on all of China's US-bound goods.

Paulson said the senators behind the tariffs bill, Charles Schumer and Lindsey Graham, were "knowledgeable" about China and shared his own objectives. But he disagreed strongly with their get-tough tactics.

"I will try to talk them out of it. Whether I will be successful or not, I don't know."

The US government argues that to sustain its growth, China needs to move away from frenetic, export-led growth and open up its financial markets to foster domestic demand. But it is also acutely aware of the electoral cost attached to a tidal wave of Chinese goods flooding US markets.

In Paulson at least, the Chinese have a US interlocutor with whom they believe they can do business.

The wealthy former banker has stressed the virtues of "patience" and "compromise" in dealing with China, a country he visited more than 70 times when at Goldman Sachs.

Reflecting his stature here, Paulson was to be accorded the rare privilege of extended talks Friday with Hu, as well as with Premier Wen Jiabao, before returning to Washington.

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