US-China strategic dialogue talks: Waiting for Mr. Xi

The annual US-China Strategic and Economic Dialogue in Washington this week dribbled down to an exercise in treading water ahead of a crucial summit between President Obama and President Xi Jinping in September.

Amid escalating tensions over China’s island reclamations in the South China Sea and alleged cyber attacks against a US government agency, most action during the two days of high-level talks was confined to a game of polite political scrimmage. Modest progress was made on financial and market issues — but neither side budged on crucial bilateral issues in a series of “candid” and “frank” exchanges. The talks ended Thursday.

Attention is now turning to the outcome of the Obama-Xi summit.  “President Xi’s State Visit is indeed one of the most important in memory because China has become a clear No. 2  to the US as an economic superpower, an emerging military power projecting power farther from home, and is involved in every matter of international import,” Robert Lawrence Kuhn, a global strategist and official adviser to the Chinese government, told Asia Times. “Moreover, perceptions are that Sino-US relations have been deteriorating, headlined by the South China Sea and cyberattacks, such that American analysts have become markedly pessimistic. For a host of reasons, China needs to stabilize relations with the U.S.—which is critical for China’s complex domestic agenda of industrial restructure and social reforms.”

But Kuhn added, “Once Xi puts his credibility on improved relations, the road ahead should become clearer and longer, albeit occasionally bumpy.”

For the moment, the US and China remain at loggerheads over cybersecurity and the South China Sea. Secretary of State John Kerry said during this week’s strategic dialogue talks that the US remained “deeply concerned” about massive attacks on US government computers that the US has traced to Chinese hackers.

China’s top diplomatic honcho, State Councillor Yang Jiechi, said the two nations needed to cooperate  on cybersecurity and called on Washington to be “impartial and objective” when it came to the South China Sea. He stressed China’s “firm determination” in safeguarding its sovereignty and urged the US to respect Beijing’s wishes.

Yang also added: “Navigation freedom in the South China Sea is guaranteed. We do believe that there will not be any issue or problem with navigational freedom in future. We hope the US can be impartial and objective to serve peace and stability in this region.”

The talks conclude

The talks conclude

One of the few upbeat notes was sounded when US and Chinese financial honchos pledged to continue work on a Bilateral Investment Treaty. China also said it would limit currency interventions, further liberalize exchange rates, open capital markets and expand access to foreign financial service firms.

The two nations also buffed up earlier concerns about combating global warming,  Iran and North Korea’s nuclear programs, the fight against Islamist militancy, and supporting global development.

The US hasn’t officially said that China’s behind the recent data breach at the US Office of Personnel Management. But Reuters quotes sources close to a US probe as saying that hackers stole data that would be helpful to the Chinese government in counter-intelligence and domestic stability matters.

Gary N. Kleiman, an emerging markets specialist who runs Kleiman International in Washington, D.C., notes that the annual bilateral talks are rarely market-moving. Their impact on the financial side was especially muted this year due to headlines made by earlier MSCI index/China A-share  and IMF exchange rate decisions.   In other areas, Kleiman noted, “US financial firms may have marginally advanced cybersecurity agendas, especially in relation to mandatory code-sharing, and from a broad economic statistics perspective Beijing committed to observing the Fund’s basic national account standard which could add clarity on debt and reserves.”

Kleiman says China’s also hewing to a policy of further banking and securities industry opening short of majority ownership. On the downside, he says distressed-asset funds looking at local ventures were disappointed in the lack of specifics related to access and treatment in the wake of  mounting formal and shadow credit troubles in China.

The September summit between the US and Chinese presidents is interesting because it is not Xi’s first trip to Washington. Xi has visited the U.S. six times — perhaps more than any Chinese leader. Obama isn’t dealing with a fresh-out-of-China neophyte — and he knows it.

Xi reportedly made his first US trip in 1985 as a high-ranking Chinese official, returning twice in 1990s and once in 2006. He returned to Washington in 2012 as China’s vice president and heir apparent. He later met with Obama in California in 2013. But the September meeting will be Xi’s first state visit to Washington.

Former US Secretary of State Henry Kissinger and other US China hands have expressed hopes that major progress will be made in resolving bilateral differences when Xi meets Obama in September. However, it’s unclear if the two sides can achieve a breakthrough — especially on the thorny issue of the South China Sea.

A Chinese source says Xi told Obama at the APEC summit in November that Beijing considers the entire South China Sea area historically and culturally part of China and won’t back down in the island dispute.

But Kuhn says both sides are maneuvering for a compromise behind the scenes.  “Any progress on the ‘sensitive’ issues of South China Sea and cyberattacks will not be played out in public, but I’ve no doubt that arrangements are being made for some kinds of accommodations, such that they will not dominate and disrupt Xi’s State Visit to Washington, which is exceedingly important — yet without compromising ‘core interests’ or losing public face,” said Kuhn, a CCTV host and the author of “How China’s Leaders Think.”

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  • Dan Kuhn

    The US will not get what it wants and that is that Obama drop his trousers , bend over in front of Xi and have Xi kiss his azz. Those days are long gone even if they exist in some wet dream of the US China hands like Kissenger. The US has beggared itself by living well beyond it`s means and throwing all it`s chips into the pot depending on the military to carry the day in global affairs. Now the cubbard is bare and even the cubbard is disappearing because the US is chopping them up to keep the fire burning. So this will be a meeting between a pauper and a rich man. The US has nothing that China needs. it may have some things China wants, but that is far different than needing anything from the US.

  • Mr. Bernard Wijeyasingha

    By and large it is the State Department that decides the foreign policies of the United States. Those who are in that department are life time workers. But having stated that, one issue that must be considered is the US form of government does change, by the will of the people. In November of 2016 China will have to see the outcome of those elections. A new President such as Donald Trump will not follow in the footsteps of Obama. He is a Billionaire, and a stead fast Republican conservative. What he brings to the table will (and not may) reverse a good deal of what Obama has put into motion, and that includes relations with China.

  • Maria Adams

    Do any of these diplomats, like John Kerry, etc, even know what they’re doing? the list of consequences from US-Presidential stupidity is long & tragic. The US mismanagement of the peace that followed WWI is what ushered in the conditions for WWII (both theaters)…it’s because of FDR’s incompetence that the young people of the 1940’s became “The greatest generation”.

  • Win T Pu

    The writer as well as the so-called experts all fail to vision [as a verb] this Dialogue in two ways.
    Firstly, they fail to go back and study the negotiations running up to the APEC summit in Beijing where the US team desperately needed some sort of announcement for Obama to go back to DC and gallop around hooting. So as consolation prize, the Chinese side suggested a treaty on carbon emissions with levels that China was going to target themselves anyway, but now the US has to make significant turn from the fracking prevailing denial. In other words, for undeclared reasons, US team needed other things from China negotiators and so gave something up to get this postcard to take home

    Second failure to reflect by the writer. This is the post-AIIB era now not the same as the Annenberg PowWow treating Xi like a fat cat and then springing the cybertheft accusation on his team. That was then and even then the Chinese arrived with 43,000 cases of US hacking China to jaw-bone.

    Fast forward, the most significant splatchzzzzz loss of face by the US Bretton Woods Empire was the line in the sand drawn against shaky folks like Singapore, S Korea, Indonesia, Philippines, Thailand not to join the AIIB. Ooops it was and a huge ooops when, instead, the most supportive and trusted, the EU4, eagerly abandoned the empire ship like little mice from the Titanic, to kiss Panda behind. Sam the man got his carpet pulled from under his cowboy boots. So going into this Dialogue is like Yosemite Sam going in accusing the Infernal Rabbit of all kinds of earthly sins. Yet once in closed doors, they who come from the Great Panda smiled and said:”Just pull my finger!”

    “OK Sam, your full of bravado, pull my finger,” Wanna mention “coalition of the willing” to threaten us? Wanna stand on a soapbox on a Persian carpet and solemnly pronounce “freedom of navigation, international standards, international law”? Watch the carpet…

    I humbly posit that a similar piece of agreement has been worked out for the Obama legacy to sign when Mr. Xi comes and they the pretorian guards of the empire have already said Xi Xi to the Panda representatives behind closed doors. Another consolation prize to save face. If I were Wang Yang I would have gone into these sessions with a little Union Jack lapel, sort of to remind the US team that you-know-who was supposed to have a “special relationship”.

  • teddyfromcd

    excellently stated – very comprehensive in fact – about the entire ‘history of relations’ between china and usa.

    you particularly observed with great precision:

    |”the USA has nothing that china NEEDS…….It may some things china WANTS, but that is far different than needing anything from the USA”/

    Absolutely brilliant point! – that few – even most world-commentators have seldom caught.

    and should be explored further.

    as of now – china is poised , with its global constructs with other nations — trillions of investments globally – and savings…to be in position very , very soon of having the USA — however ‘important’ it is to china as china often says — merely being no more important than many other ‘big powers’.

    certainly not even an equal in economic and geo-political terms.

  • George Silversurfer

    Are you related to Robert Kuhn mentioned in the article?

  • Dan Kuhn

    No I don`t think so. Possibly somewhere in nthe far distant past. But it is not a common name.

  • d.g.summers

    Preparations for war will continue.
    China will have to make some concessions on Xi’s trip to Washington.
    In absence of this, if Obama makes concessions, the hawks will remove him.
    The US and China both know war is inevitable.

  • China Lee

    PLA Navy protects 2,000-year-old Chinese sovereignty over South China Sea islands

  • mulga mumblebrain

    The racist and civilizational suprenacist psychopaths who rule the USA, and their various Western stooges WILL NEVER allow a non-Western power to rise to global economic hegemony, or even, as China wishes, equivalence in a multi-polar world. Such a situation offends their self-conception as Exceptional, Indispensable, ‘Under God’, with a ‘Manifest Destiny’ (the varieties of Western narcissism are legion)and, as you say, was is certain. The Yankee ruling elite must be slavering at the prospect of inflicting ‘Shock and Awe’ on the Chinese.

  • mulga mumblebrain

    The USA has been run for some time by the neo-conservatives, a mostly Jewish cabal, many ex-Troskyites and/or acolytes of Leo Strauss, in foreign affairs, and they absolutely reject any accommodation with any other power anywhere on Earth, ever, in what is known as the Wolfowitz Doctrine. The State Department WASP do as they are told, but one or two occasionally revolt and turn whistle-blowers, like Walt and Mearsheimer.

  • Mr. Bernard Wijeyasingha

    Just googled “Wolfowitz Doctrine” and I can see where your comment is coming from. looking at it that way, yes you are right. but many things make that Doctrine as significant as the Monroe Doctrine.
    -On a domestic basis the arrival of tens of millions of Hispanic illegal immigrants is changing the US into a “Latin American power” and away from her Euro centric world.
    -Both China and Russia have moved into the new world. China plans to bypass the Panama canal with a railway system that goes across Brazil. Russia intends to build military outposts in Venezuela, Nicaragua and Cuba.

    -America’s containment policy of China and Russia is now turning into a containment policy of the US by those nations.
    -Europe which is the main power of the US in the sense of NATO is in deep economic problems.
    This is a quick take on what I see and why the Wofowit Doctrine is an attempt to stem a problem than state a fact.
    BTW the Jews in the US are liberal. they fully support the liberal socialist policies of Obama. they are not like the Jews of Israel which are hyper nationalistic and by and large do not share the values of American Jews. If you want further elaboration I will gladly do that. I know this is a very short summary.

  • Northern Light

    I often say that we were all most fortunate that the people of Russia have such an ancient and deep-seated sense of humanity, because when the USSR disintegrated it would have been very easy for someone to push a button and launch Armageddon — but it never happened. Were the same sort of calamity to befall the US I am not convinced we could count on the same sort of humanity saving us all from thermonuclear annihilation.

    I strongly believe the United States are currently at their most dangerous in decline. We are at much greater risk now than we have ever been before.

  • James Jerome

    Irregardless of the outcome of the meeting, China should;
    1. Continue to build up its Military.
    2. Continue to remove the bankrupt dollar as the worlds currency.
    3. Continue to partner with Russia on economic and military matters.
    4. Continue to build up those Islands as a defensive measure against US hegemony.
    5. Continue to build new world economic and financial system.