China and the US are scheduled to start their annual "flagship" strategic and economic dialogue on Tuesday in Washington, DC where the world's two largest economies seek to find common ground and avoid strategic mistrust amid heightened tensions. The meeting, which comes a few months ahead of Chinese President Xi Jinping's official visit to the US in September, is seen by analysts as crucial to Sino-US ties this year as the two countries are expected to play down their differences and focus more on cooperation, after trading accusations in the past few months over thorny financial and political issues such as the South China Sea issue.

On Tuesday, Chinese Vice Premier Wang Yang and State Councilor Yang Jiechi, as special representatives of the Chinese president, are set to co-host the seventh US-China Strategic and Economic Dialogue (S&ED) with US Secretary of State John Kerry and Treasury Secretary Jacob Lew, who will represent US President Barack Obama.

Later that day, Kerry will co-chair the sixth round of the High-Level Consultation on People-to-People Exchanges with Chinese Vice Premier Liu Yandong.

Changing rhetoric

"The Chinese delegation has three purposes at the S&ED talks - first and the most important is to prepare for Xi's September visit to the US; the second is to tackle critical regional and global issues with the US; and the third is to dispel strategic mistrust," Jin Canrong, vice director of the School of International Studies at the Renmin University of China, told the Global Times.

Daniel Russel, US Assistant Secretary of State for East Asian and Pacific Affairs, said Thursday that topics involving the South China Sea, cyber security and human rights would be high on the US agenda. He added that these issues "have the potential to drive strategic mistrust."

"In the short term, the meeting has a 'turning-point' effect. Sino-US relations were not exactly positive during the first half of the year. The talks could help change the atmosphere in preparation for Xi's visit," Wu Xinbo, a professor at the Center for American Studies of Fudan University, told the Global Times.

The change in rhetoric was also reflected in Russel's remarks, who said Thursday that maritime disputes in the South China Sea were "not fundamentally" between the US and China and the US had "an unwavering determination … to avoid military confrontation," Bloomberg reported.

Currency dispute

In a commentary published in the Wall Street Journal on Monday, Chinese Vice Premier Wang Yang said the talks were "critical" to a bilateral investment treaty (BIT) that had been stalled since 1982.

"Many Chinese companies have long been frustrated by the high barriers the US has imposed on investments from China such as stringent security reviews," Wang wrote, adding that "more positive steps" need to be made.

Tao Wenzhao, a research fellow at the Chinese Academy of Social Sciences, said substantial progress could be made for the BIT during the talks but a final resolution may take one or two years.

The currency issue could be tackled during the talks.

Last month, US Treasury Secretary Jacob Lew said that the yuan remains undervalued and the exchange rate is a source of concern despite reports from the International Monetary Fund state that it will consider including the yuan in its Special Drawing Rights, dropping a long-held view that the yuan was too cheap.

"Over the past decade China has been committed to market-based currency reforms, and the yuan has appreciated 35 percent on the US dollar," Wang wrote. "All of this means a big improvement in China's economic structure."

Also, two joint sessions will be set aside for environmental issues after Xi and Obama agreed to cut greenhouse gas emissions in November.

The 'big picture'

Assistant Foreign Minister Zheng Zeguang said Friday that the two sides will hold discussions on "how to deepen pragmatic cooperation" and "properly handle differences."

He said China's foreign policy is focused on "building a new model of major-country relationship with the US."

"Zheng is trying to convince the US to look at bilateral relations in a more positive way by stressing the big picture, which is what the upcoming visit of Xi is likely to focus on," Wu said. "He also wants to tell the US to stop trying to prevent China's global rise."

The US has proposed an Asia-Pacific trade pact that excludes China and previously told its allies to think twice before joining the China-initiated Asian Infrastructure Investment Bank.

"Both countries are adapting to what I call a 'new norm.'" Wu said.

"Frictions are rising and so is collaboration. Bilateral relations are becoming more complex and developing new dimensions. At the same time, China is seeking a more active role in the bilateral relationship instead of being told what to do," he said.