This morning, the United States and China launched two days of economic negotiations in Washington. Leaders from both countries came together to participate in the third Strategic and Economic Dialogue.

Though economic relations have relaxed as of late, a number of important issues remain at the forefront of a full two day agenda. U.S. debt handling is sure to be a topic of discussion, but many other topics have a direct impact on both the US’ and world’s economic recoveries.

In opening statements, Treasury Secretary Timothy Geithner complemented both countries on efforts of financial reform, more flexible exchange rates between the dollar and the Renminbi, stronger protections for US companies in China, and a growth strategy for China that is less reliant on exports.

Secretary Geithner also laid a vision for this week’s negotiations that will focus further on exchange rates – which have improved, yet are still problematic — financial reforms, level playing fields for market access, and intellectual property rights.

Intellectual property rights remain a concern for the United States, which Reuters reports cause a $3.5 billion trade loss in 2009 alone due to piracy in China.

In addition to Geithner’s concerns, Reuters expects the US trade deficit, which raised 20 percent in 2010, to remain a high priority this week.

Finally, Reuters highlighted specific concerns regarding U.S. debt levels:

China’s has the world’s biggest foreign exchange reserves at just over $3 trillion.

About two-thirds are estimated to be invested in dollars. Beijing has repeatedly nudged Washington to give assurances about government debt levels and the strength of the dollar.

After Standard & Poor’s slapped a negative outlook on the U.S. credit rating in April, China urged Washington to protect investors in its debt.

China has little choice but to keep its dollar-denominated debt for now, and that deters the government from voicing any worries about U.S. fiscal policy more loudly.

With the Chinese government determined to limit the yuan appreciation, it must buy a large amount of the dollars streaming into the country from its trade surplus and recycle those into U.S. investments.