Full coverage: 8th China-U.S. S&ED & 7th CPE

The annual U.S.-China Strategic and Economic dialogue comes little more than a week ahead of the Fed's next policy meeting. One issue on many minds is the likely Fed interest rate hike - as it was largely expected to happen not later this month then possibly in July. Our reporter Martina Fuchs takes a look at how China’s market will be impacted by a potential policy tightening.

The US Federal Reserve's interest rate hike seems to be looming...

Just as the 8th China-U.S. Strategic and Economic Dialogue is kicking off today Monday in Beijing.

Central bank chief Janet Yellen recently said the Fed should raise interest rates "in the coming months" if the economy an jobs pick up as expected, bolstering the case for a rate increase...

Investors have positioned themselves already for the June 14-15 monetary policy meeting, or 6 weeks later for the July 26-27 meeting.

But expectations for the next Fed rate hike were knocked back to at least July or even later after US non-farm payroll data on Friday showed US employers added only 38,000 jobs in May, far below market estimates.

In China, the currency market will feel the biggest impact.

"Definitely it looks like there will be an interest rate hike by the Fed soon. And in that case there will be downward pressure on the renminbi, that is inevitable. It has nothing to do with the renminbi itself as much as the US Fed's impact on the world economy and considerations of global investors," said Rob Koepp, China director The Economist group.

The yuan has dropped about 1.5 percent last month, joining emerging market peers from India to Brazil and Malaysia in depreciating versus the U.S. currency.

The bearish pressure facing the yuan right now due to the strong performance of the US dollar could make it again difficult for the People's Bank of China to keep a stable RMB exchange rate.

Meanwhile, China is still struggling with the same old problems, such as the...

"Property market. Although we see a rebound in the real estate market in Q1 and it's heavily been driven by the liquidity since last year. However, I still think that the oversupply in the tier-three, tier-four cities in China is huge and after the price surge in tier-one cities the absolute level of the price is so high the affordability is so worse, I think the sentiment will cool down a bit and then the property investment will slow down as well," said Yang Zhao, chief China economist nomura.

The Chinese central bank intervened heavily last year in the onshore and offshore currency market and early this year to try to force speculators out of the yuan market.