Mr. Paulson must be feeing significant pressure. If he isn’t, we’ll just reiterate here the things that should give any thinking U.S. Treasury Secretary nightmares instead of a good night’s sleep as he jets his way to Beijing.

Congress

The US Congress has complained for several years about China’s undervalued currency, the lack of intellectual property protection in China, over-reliance on subsidies, and several other issues. The Treasury Secretary, in interviews and in documents has said over and over that he is committed to solving “issues of concern to the US Congress.”

One of the most troubling parts of China’s economic policy, from the point of view of the U.S. Congress, is the undervaluation of the yuan. This has been a particular political sore point with no less than three bills dealing with China’s currency policy scheduled for Congressional action this year. Many in Congress want sanctions imposed upon China for its monetary policy. Yet Mr. Paulson has, in the past, been highly effective at convincing the Congress to delay legislation that would sanction China over currency.

While in China, one might expect Mr. Paulson to lay out the complexity of the difficulty he faces with the Congress, in the hope that China will alleviate his pain.

But Chinese scientists believe global warming is to blame for a steep decline in the bird populations and types.

“Global warming has become a reality here,” said Chen Dongmei, director of the World Wildlife Fund’s climate change and energy program in China. “Everyone can feel that there has been a change in Beijing’s attitude toward climate change over the past few years.”

Secretary Paulson fully understands this issue. “The only way to make progress on climate change is to engage all the large economies, developed and developing, to work toward embracing cleaner technology and reducing emissions,” Paulson said in a statement. “What’s happening with the environment in the middle of China not only affects the local climate and economy but also the global climate and economy.”

Though Beijing has imposed rigid pollution and greenhouse gas emission limits local governments are continuing to invest in dirty, resource-intense industries, jeopardizing Beijing’s goals of saving energy and cutting pollution.

On Monday, July 23, , the China Daily newspaper reported that some regions are encouraging steel, cement and other heavy industries to boost economic growth despite demands from Beijing to rein in those sectors. The central government in Beijing is being ignored.

“The central government is committed to achieving the (green) targets but some local governments have turned a blind eye to them,” said He Bingguang, a deputy director with the National Development and Reform Commission.

This is a dilemma Secretary Paulson will share with his number one host, President Hu Jintao. Both men should be uncomfortable with this tar baby: a problem seemingly to large to solve.

Intellectual Property Rights

This has been a stumbling point between the two nations for a long time. American writers, film makers, computer software engineers and a host of others involved in the creative process of producing “intellectual property” expect that patents, copyrights, licenses, and other protections will ensure their work is not copied or stolen without proper reimbursement.

Chinese “entrepreneurs” do not believe in these copyright laws and freely copy just about everything for resale on the street.

I can remember buying pirated (illegally copied) expensive books in China in the 1970s. Books like the famous Oxford English Dictionary (OED), a tome that would cost hundreds of dollars in London, sold for just a few measly bucks in China. As I student I wanted reference books (this was before the internet, kids) and there was no place where reference books were less expensive than China. That was because the Chinese cared nothing for copyright laws or other such niceties.

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