Stanley's blog

The China-EU Strategic and Economic Dialogue (SED), held in Beijing on 24-25 May, brought a pack of high-ranking officials on both sides. US Secretary of State Hillary Clinton, and Treasury Secretary Timothy Geithner, accompanied by 16 cabinet secretaries or agency heads, led a group of 200 Americans, while State Councilor Dai Bingguo and Vice Premier Wang Qishan led the Chinese delegation.

Was the quality and quantity of the delegations justified by the results of the meetings? In terms of substantive achievement, clearly not. Washington believes, however, that there is a need for such meetings, which demonstrate the importance of the relationship and increases the chance that China will operate within the global system rather than independently.

The meetings put the relationship back on track after serious problems. Beijing is unhappy about growing protectionism, arms sales to Taiwan and President Barack Obama’s meeting with the Dalai Lama.

Washington is unhappy about China failing to support strong sanctions against Iran, the value of the RMB and market access. Expectations were not high, but in the words of Vice-Premier Wang, “It has been candid, pragmatic, and successful.”

In addition to the SED meeting, a number of important bilateral meetings were held at which energy, security, climate change, UN peacekeeping operations, Korea and other issues were discussed.

Several agreements were signed. For the first time, Chinese and American experts will work closely together to explore China’s vast natural gas potential. This could lead to new economic opportunities in both countries, and a lower carbon emission load.

The US has set a goal of sending 100 000 American students to China in the next four years to learn Mandarin and to experience Chinese culture, and China will give 10 000 scholarships for American students.

A research joint venture to develop biofuels for use by Chinese airlines was agreed and a series of research partnerships in renewable energy were announced, involving US government agencies, Boeing, Chinese research institutions and state companies including Air China and PetroChina.

RMB revaluation is a priority US demand. Beijing has agreed to reform its currency policy, which has pegged the RMB to the dollar at current levels since mid-2008, but no timetable has been given.

Washington well knows that public pressure would be counter-productive. The fall in the euro has complicated the decision. There appears to have been no change from the previous position. Timothy Geithner said that China’s response did not put American worries to rest, but there was “progress.”

The main US concern in trade policy is market access: in particular government procurement in the light of China’s new “indigenous innovation” programme, as well as broader concerns over increased discrimination against foreign firms in China.

Beijing is also concerned about US market access and the increasing number of antidumping and countervailing duty cases against Chinese imports, as well as US restrictions on high-tech exports.

Secretary Clinton in the joint statement welcomed progress while pointing out that not all American concerns have been met.

Foreign policy discussion was dominated by North Korea, in the light of the recent sinking of a South Korean ship. Hours of talks yielded no discernible results. Beijing disapproves of the conduct of Kim Jong-il, but does not know how best to deal with such an erratic leader.

A collapsed North Korean régime is not in China’s interest, since it would face a massive surge of refugees and the removal of a buffer with South Korea, with its US military links. But supporting sanctions is still very much in doubt. The Foreign Ministry public reaction was noncommittal: “We hope all the relevant parties will exercise restraint and remain cool-headed.”

US officials hope China gradually to accept that North Korea should be held accountable for the torpedo attack. Clinton told reporters that “the international community has a responsibility and a duty to respond” to the sinking, which “requires a strong but measured response,” but didn’t indicate what this entailed. Russia’s attitude will be relevant.

China now supports a UNSC sanctions resolution against Iran, but with a watered down wording. Afghanistan and Pakistan were also discussed.

Although the US-China military dialogue is still officially in suspension, the presence of Admiral Willard, the current US Pacific Commander, was a positive sign. After the meeting, Willard said: “What was very striking yesterday was my impression of the very advanced, sophisticated and mature dialogue that’s occurring across a wide range of subjects between China and the US.”

In sum, the SED has not yet achieved its fundamental objective of forging deep strategic and economic China–US cooperation, but clearly serves a useful purpose, even if one that didn’t necessarily justify the sheer size of the US delegation.

European comment by politicians and media has been very limited. The Economist journal wrote; “Much more reassurance will be needed from both sides in the America-China relationship.”

The European ‘shopping list’ of problems in China is similar to that of the US and therefore it is a shame that more was not achieved at the SED, from which EU companies would also have benefited. It also demonstrated that the quality and quantity of the participation does not seem materially to affect its outcome.

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