US, China struggle with mid-life crisis By Jing-dong Yuan
MONTEREY, California - Beijing's highly charged, unequivocally strong responses
to United States foreign policy actions in recent months have gone beyond past
practices of mere rhetoric, setting the scene for more trouble when disputes
over trade, currency and the pending Iran sanctions issue are added to the mix.
The first sign of a fracture after a smooth and upbeat first year in
Sino-United States relations under the Barack Obama administration came at the
climate summit in Copenhagen last December, followed by the Google controversy,
the spat over cyber-space, the administration's decision on arms sales to
Taiwan, which was met with the threat of sanctions on US weapons suppliers, and
Obama's meeting with the Dalai Lama
last month. Expected high-level exchanges, especially between the two
militaries, have been put on hold.
The Obama administration started its tenure viewing the relationship with China
as one of its most important bilateral ties and cast the relationship as
cooperative, positive and comprehensive. There was the visit by Secretary of
State Hillary Clinton in February last year; the Hu Jintao-Obama acquaintance
at the Group of 20 summit in London in April; the elevation of previous
sub-cabinet bilateral high-level and economic dialogues into one strategic and
economic dialogue at the cabinet level; and the Obama visit to China in
November.
The frequency and level of bilateral high-level contacts was unprecedented, as
were the high (and perhaps unrealistic) expectations of closer cooperation
between the world's sole superpower and its fast-growing runner-up. Just think
about the accolades of a Group of Two, Chinamerica, among others.
So, what went wrong? The global economic and financial crises have imposed
significant constraints on both Beijing and Washington, with major problems of
unemployment, financial insolvency, economic downturn (for the US), and growing
socio-economic turmoil. The imperatives of stimulating economic activities and
keeping and generating jobs have become top priorities for both countries.
China in particular has become a major factor in how the Obama administration
handles its economic challenges, including continued Chinese purchases of US
debt.
The imperatives of domestic politics also find Beijing and Washington reluctant
to cede too much ground on issues related to trade balances, currency
evaluation and climate change - especially when dealing with them requires
sacrifices that neither side can afford and makes them unwilling to adopt
policies that involve short-term costs. Both governments reacted negatively
toward each other's perceived buy-America/buy-China provisions in their
respective stimulus packages; neither was willing to make binding commitments
to the reduction of gas emissions at the Copenhagen summit.
China has basically halted the gradual appreciation of the yuan, which has
risen 25% against the US dollar since 2005, then it initiated a policy that in
effect pegged the yuan to the greenback. While Chinese exports have plunged in
the past two years, Beijing's policy of keeping its currency stable has enabled
it to regain an upward trajectory in exports, which have increased massively in
recent months. Understandably, this has been met with charges of currency
manipulation from certain quarters of the US government and manufacturing
sectors.
Economic conflict appears unavoidable in the best of times in Sino-US
relations, let alone when America has been suffering an unusually high level of
unemployment over a protracted period, and when the control of congress by the
Democrats, whose electoral base is in organized labor and manufacturing, is
pressuring the administration to confront what is seen as unfair trade with
China.
But the longer-term and broader implications of the current US-China spat and
controversies are the structural changes now taking place in the international
system. China is on the rise while the US is in decline. The government in
Beijing presides over a gross domestic product close to $5 trillion and the
country is poised to surpass Japan as the world's second-largest economy. And
with more than $2.4 trillion in foreign reserves and $900 billion in US debt
holdings, Beijing finds it necessary, and is confident about, standing up to
Washington.
Not that Beijing is eager to pick fights with Washington or that it is becoming
impatient to take the number one spot. Far from it. China has remained low
profile and moderate in displaying its newfound prowess and is reluctant when
under international pressure to take on more responsibilities, such as
intervention in Myanmar or Darfur, for example.
But China's rising power makes it less willing to accommodate US interests,
especially when this would incur costs - costs in reputation, such as, in the
eyes of the Chinese, that their government is too weak; costs such as imposing
more sanctions on Iran and tightening existing sanctions on North Korea. China
could still do it, but not without proper compensation and the ability to
explain to its constituency, especially its hyperactive netizens.
In such circumstances, US arms sales to Taiwan and Obama's meeting with the
Dalai Lama, the exiled Tibetan spiritual leader, appear to Beijing as
especially insensitive and insulting and require strong responses. But
Washington is perhaps equally in a bind in that Obama was largely perceived as
too deferential and weak to his hosts on his visit to China last November; his
postponement of a meeting with the Dalai Lama last year triggered strong
criticism as well as disappointment. He could ill-afford delaying decisions on
arms sales already announced by the outgoing George W Bush administration. And
when he did meet the Dalai Lama last month, it left Beijing predictably
expressing rage.
Looking ahead, one can expect more instances of conflict than of cooperation.
The Sino-US relationship remains the most important bilateral relationship in
the world and both countries can gain a lot from cooperation. This requires
both Beijing and Washington to adjust and adapt during a period where they have
never needed each other more in dealing with a multitude of problems.
However, this is also a period in which power transitions and domestic politics
could push the two countries on a collision path that neither seeks nor can
gain from and cause a major rupture of ties.
Dr Jing-dong Yuan is director of East Asia Non-proliferation Program at
the James Martin Center for Non-proliferation Studies, Monterey Institute of
International Studies, where he is also an associate professor of international
policy studies.
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