INDUSTRIAL OVERCAPACITY & TRADE DISPUTES

The high-level dialogue also comes at a time when US steel producers increasingly resort to trade remedy and tariff protection to ride out a sluggish steel market, as steel excess capacity has become an acute global challenge.

The US has overtaken India as the leading user of anti-dumping and anti-subsidy investigations, with China and its steel sector the biggest target, according to a recently-released annual Global Trade Protection Report.

The United States would encourage China to reduce excess industrial capacity in its key base metals sectors and "make supply in these sectors more sensitive to underlying domestic and global demand conditions," Nathan Sheets, US Treasury's undersecretary for international affairs, said last month at a Brookings event to preview the upcoming S&ED.

But China opposes abuse of trade remedy measures, Zhu said Thursday, adding that both parties should abide by WTO rules and hold dialogues to solve trade disputes.

"We should oppose trade protectionism in the context of the principle of free trade, which is agreed upon by and serves the interests of both countries," he said.

US trade experts have also warned that resorting to protectionism will not cure the US steel industry's grave ills, and import restrictions serve to harm the overall US economy rather than help it.

As bilateral trade and investment between China and the US have rapidly expanded in recent years, it's inevitable that problems and contradictions will emerge. But the S&ED mechanism has played an important role in promoting mutual trust, managing differences and avoiding miscalculation in bilateral economic relations, experts said.

"As this year's S&ED will be the last under the Obama administration's leadership, I must stress that continued cooperation with China on the diverse set of issues covered in the S&ED is crucial- not just to our respective countries, but globally as well," Sheets said.

"The last one will be extremely important as ever, perhaps even more so, given the current election season in the United States, to demonstrate that the approach to bilateral relations of sitting down and talking through problems leads to better outcomes than the alternative approach, which involves threats and more coercive forms of interactions," MacFarquhar said.

"It will be important for both sides to demonstrate that engagement yields real tangible results that the peoples of both countries can actually feel, and that are contributing to create jobs and their economic wellbeing," he added.

Dollar also agreed that this S&ED is "a good time for China and the United States to demonstrate that regular, high-level exchange produces results, increasing the likelihood that whatever administration comes next will want to maintain something similar."