AKIPRESS.COM - President Xi Jinping warned on Monday that China’s disagreements with the U.S. could not all be solved through dialogue, as his government’s final cabinet-level meeting with the Obama administration kicked off in Beijing, FT reports.

“Some differences can be settled through discussion – and some cannot,” Xi said at the annual Sino-U.S. Strategic and Economic Dialogue, while acknowledging that there should be more communication. “As the world’s largest developing country and largest developed country, we must increase our coordination on macroeconomic policy.”

John Kerry, U.S. secretary of state, noted the two sides’ previous agreements on climate change and emphasized that the U.S. wanted to see a “peaceful resolution” to China’s various territorial disputes with its neighbors in the South and East China seas.

Passing through Mongolia at the weekend, Kerry had warned Beijing not to declare an Air Defense Identification Zone over the South China Sea as it had over the East China Sea three years ago.

Jack Lew, U.S. Treasury secretary, highlighted the global impact of surplus Chinese capacity in steel and other industries.

“Excess capacity has a distorting and damaging effect on global markets,” Lew said. “Implementing policies to substantially reduce production in a range of sectors suffering from overcapacity, including steel and aluminum, is critical to the function and stability of international markets.”

U.S. and Chinese military officials had earlier traded barbs at another annual forum, the Shangri-La Dialogue in Singapore, about Beijing’s increasingly assertive posture over regional territorial disputes, especially in the South China Sea.

The focus on overcapacity comes as steel mills and jobs are being scythed across the globe as China churns out steel and other goods, pushing prices lower. That has pivoted the topic to the top of the agenda, nudging aside more traditional angst over the value of the renminbi.

U.S. officials and the International Monetary Fund have welcomed moves by China’s central bank to make the renminbi’s “daily fix” against the dollar more market-determined, by setting it with reference to the previous day’s market close.

“We were pleased to see reforms made last year and the recognition of that progress in the IMF decision to include the renminbi in the [IMF’s reserve currency] basket,” Lew said.

Also on the agenda are the pace of China’s economic reforms and the lack of progress on the two countries’ Bilateral Investment Treaty negotiations.

A recent warning about dangerously high debt levels carried in the People’s Daily, the ruling Chinese Communist party’s flagship newspaper, was widely interpreted as a signal from President Xi Jinping not to waver from difficult economic reforms.

But many analysts doubt local governments’ willingness to close plants and lay off workers in oversupplied industries such as steel – and see a similar reluctance in the Sino-U.S. BIT negotiations.

The Obama administration has been pressing Xi’s trade negotiators to ease limits on foreign investment in a number of industries.

“The BIT is really a proxy for China’s willingness to open and liberalize its markets,” said Jeremie Waterman, Greater China director at the U.S. Chamber of Commerce in Washington. “But there are some indications right now that China is moving the other way.”

He added that one test will be whether Beijing provides a new, shorter “negative list” of sectors in which it would continue to restrict foreign investment. “U.S. officials and business will be looking at whether it is a credible offer [or] an offer that signals ‘OK, we’re checking a box because we want to avoid blame for stalling the negotiations’.”