Stanley's blog

I have expressed growing concern over the dangers of the deterioration of US-China relations – the Obama visit, Taiwan arms sales, Dalai Lama, Google, cybersecurity and the trade deficit, with the likelihood of China being branded a ‘currency manipulator’ by the US Treasury on 15 April.

The leaders on both sides have realized these dangers and that it is not in their interests to have such tensions: there is a sudden thaw in relations. Zhang Yesui, the new Chinese ambassador to the US was warmly received last week in Washington by President Obama. The US Treasury has postponed the currency report. Hu Jintao will be in Washington on 12 & 13 April for the nuclear proliferation summit. A state visit by President Hu to the US in June is under discussion. China has agreed to “engage in negotiations” over a UNSC sanctions resolution against Iran.

The second round of the Strategic and Economic Dialogue (SED), to be held in Beijing in late May, takes on greater significance. Vice Premier Wang Qishan and State Counsellor Dai Bingguo will represent China, and Secretary of State Hillary Clinton and Treasury Secretary Timothy Geithner will represent the US.
Zhu Feng, Deputy Director of Peking University’s Centre for International & Strategic Studies sees Hu’s decision to attend the Washington meeting as “signaling the return of pragmatism in the handling of China’s ties with the US.”

Zhu goes on to say that
“it is truly a significant decision. Given the bitter debate within China on how to react in the wake of the US violation of “core interests” of Beijing – Taiwan and Tibet officially tagged as Chinese interests of this sort – and the divisions among Chinese elites, the announcement represents a new consensus and the punctuation of domestic debates in China. I can imagine how difficult the policy weighed on China’s top leadership – the Standing Committee of Political Bureau of CCP – since we know that quite a significant number of Chinese officials objected to Hu’s attendance. These opponents thought that Hu’s appearance was a one-sided concession to the ruthless undermining of Chinese “national dignity.”

He points out that the US has been selling arms to Taiwan for 30 years and meetings with the Dalai Lama have occurred for 18 years. But Chinese opposition to them seems tougher than ever in 2010.

Zhu believes that he global financial crisis, Beijing’s possession of huge amounts of US Treasuries, and the presumed US need for Chinese cooperation, are creating mixed feelings of confidence and frustration among Chinese. They assume that the US should respond nicely to China while China does favours for the US on a couple of fronts – like investing in its bonds and jointly stimulating the world economy. For them, the rigid US position does not reflect the nature of the new Sino-US symbiosis, and fails to recognize Beijng’s growing international clout.

I have heard Chinese comments that Europe welcomed a deterioration in China-US relations. This is certainly not in our interests as the EU would be directly affected by any serious dispute. Can we hope that the wisdom of the leaders will be matched by the US Congress, or will the protectionist forces strive in a destructive direction? Both governments are influenced by their domestic audiences and there will be many more tests for the relationship.

As today’s Financial Times leader points out in relation to China’ external balance and exchange rate, “China is too big to frame its policies without taking their global impact into account. But they are also big issues for China itself.” The opportunity of the thaw in relations must be used to find a US-China modus vivendi for these policies.

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