An OpEd from today's WSJ
A New Strategic and Economic Dialogue with China
Few global problems can be solved by either country alone.
By HILLARY CLINTON AND TIMOTHY GEITHNER
When the United States and China established diplomatic relations 30 years ago, it was far from clear what the future would hold. In 1979, China was still emerging from the ruins of the Cultural Revolution and its gross domestic product stood at a mere $176 billion, a fraction of the U.S. total of $2.5 trillion. Even travel and communication between our two great nations presented a challenge: a few unreliable telephone lines and no direct flights connected us. Today China’s GDP tops four trillion dollars, thousands of emails and cellphone calls cross the Pacific Ocean daily, and by next year there will be 249 direct flights per week between the U.S. and China.
To keep up with these changes that affect our citizens and our planet, we need to update our official ties with Beijing. During their first meeting in April, President Barack Obama and President Hu Jintao announced a new dialogue as part of the administration’s efforts to build a positive, cooperative and comprehensive relationship with Beijing. So this week we will meet together in Washington with two of the highest-ranking officials in the Chinese government, Vice Premier Wang Qishan and State Councilor Dai Bingguo, to develop a new framework for U.S.-China relations. Many of our cabinet colleagues will join us in this “Strategic and Economic Dialogue,” along with an equally large number of the most senior leaders of the Chinese government. Why are we doing this with China, and what does it mean for Americans?
Simply put, few global problems can be solved by the U.S. or China alone. And few can be solved without the U.S. and China together. The strength of the global economy, the health of the global environment, the stability of fragile states and the solution to nonproliferation challenges turn in large measure on cooperation between the U.S. and China. While our two-day dialogue will break new ground in combining discussions of both economic and foreign policies, we will be building on the efforts of the past seven U.S. administrations and on the existing tapestry of government-to-government exchanges and cooperation in several dozen different areas.
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At the top of the list will be assuring recovery from the most serious global economic crisis in generations and assuring balanced and sustained global growth once recovery has taken hold. When the current crisis struck, the U.S. and China acted quickly and aggressively to support economic activity and to create and save jobs. The success of the world’s major economies in blunting the force of the global recession and setting the stage for recovery is due in substantial measure to the bold steps our two nations have taken.
As we move toward recovery, we must take additional steps to lay the foundation for balanced and sustainable growth in the years to come. That will involve Americans rebuilding our savings, strengthening our financial system and investing in energy, education and health care to make our nation more productive and prosperous. For China it involves continuing financial sector reform and development. It also involves spurring domestic demand growth and making the Chinese economy less reliant on exports. Raising personal incomes and strengthening the social safety net to address the reasons why Chinese feel compelled to save so much would provide a powerful boost to Chinese domestic demand and global growth.
Both nations must avoid the temptation to close off our respective markets to trade and investment. Both must work hard to create new opportunities for our workers and our firms to compete equally, so that the people of each country see the benefit from the rapidly expanding U.S.-China economic relationship.
A second priority is to make progress on the interconnected issues of climate change, energy and the environment. Our two nations need to establish a true partnership to put both countries on a low-carbon pathway, simultaneously reducing greenhouse gas emissions while promoting economic recovery and sustainable development. The cross-cutting nature of our meetings offers a unique opportunity for key American officials to meet with their Chinese counterparts to work on the global issue of climate change. In the run-up to the international climate change conference in Copenhagen in December, it is clear that any agreement must include meaningful participation by large economies like China.
The third broad area for discussion is finding complementary approaches to security and development challenges in the region and across the globe. From the provocative actions of North Korea, to stability in Afghanistan and Pakistan, to the economic possibilities in Africa, the U.S. and China must work together to reach solutions to these urgent challenges confronting not only our two nations, but many others across the globe.
While this first round of the U.S.-China Strategic and Economic Dialogue offers a unique opportunity to work with Chinese officials, we will not always agree on solutions and we must be frank about our differences, including establishing the right venues to have those discussions. And while we are working to make China an important partner, we will continue to work closely with our long-standing allies and friends in Asia and around the world and rely on the appropriate international groups and organizations.
But having these strategic-level discussions with our Chinese counterparts will help build the trust and relationships to tackle the most vexing global challenges of today—and of the coming generation. The Chinese have a wise aphorism: “When you are in a common boat, you need to cross the river peacefully together.” Today, we will join our Chinese counterparts in grabbing an oar and starting to row.
Mrs. Clinton is the U.S. Secretary of State. Mr. Geithner is Secretary of the Treasury.
Clinton and Geithner: A New Strategic and Economic Dialogue with China - WSJ.com
I am sorry, but I do not buy this "G2" arrangement/argument/suggestion, neither does the Chinese government (at lease officially) Sure they are economically interdependent, but that is about it. But when it comes to Geopolitics and all sorts of other issues, those two sides are far from "harmonized"
What we should look at is reality. And realities do change, sometimes quite rapidly.
Here is a British commentry on current US and China relations. This would be different say just one year ago.
The US and China will run the world, whether we like it or not
27 July [Telegraph/AdrianMichaels] China sent some 150 delegates to Washington for this week’s two-day “dialogue” hosted by Tim Geithner and Hillary Clinton. It’s an important meeting, billed by some as a Group of Two (G2) and indicative of a new world of two superpowers.
Barack Obama reinforced that notion in his opening remarks: “The relationship between the United States and China will shape the 21st century.” That is almost certainly going to be true - China is predicted to overtake America as the world’s biggest economy in less than 20 years. Some may think it pretty laughable anyway that the Brits or the French or people from some of those other piddling European places should still be seeking to run the world.
But it is pretty galling for Indians, or for the architects of the European Union, or anyone else who may be worried that decisions taken by the Americans and Chinese on matters ranging from climate change to finance to the internet will have an impact on us all whether we agree or not.
For me the summit is a further example of this inevitability. We in the West have not much felt the need to consult, co-opt and encourage China on very much for 150 years. It is clearly better to do so now that it has become so powerful again. And it is foolish to say we cannot talk until matters such as human rights or currency regimes are properly on the agenda.
I do agree that such summits expose a nasty level of sycophancy. We need the Chinese, and they need us. Therefore we choose to moderate our remarks on uncomfortable subjects (or, like Obama yesterday, we weasel around saying that “both” countries think minority rights are important). But China is slowly warming to international relations, and almost all emerging economies saw tremendous inequalities in the rights and treatment of their peoples. It cannot be excused, but it does usually change over time.
I also think talk of a G2 is overblown. Remember at the end of last year the G20 emerged as the best forum for discussion on the global economy. But events in Washington this week are a strong reminder to the EU and others that they must raise their diplomatic game if they want their voices to be heard. .....
Last edited by Merlin; 29 Jul 09, at 07:00.
China is not even a G8 member to say the least or interested to become one. It is not that black and white, the US wishes China to share some responsibilities in some areas, in others the US wishes to keep its monopoly forever. In 19th century, China’s GDP accounted for about one fourth of the world’s total, but China was a prey.
yes, but "the Dialogue" is a framework for communication, not for problem solving nor any form of alliance/partnership. More importantly, the only "value" both sides share is the dollar (sorry Yuan) and outside the realm of economic, China's actually influence on the world remain limited.
Speaking of which, the term "framework" has been way Over-Used, Tim used it five times in a single speech yesterday.
Last edited by xinhui; 29 Jul 09, at 05:10.
Other than strategic diplomacy and economic stimus/revocery, climate change is also an important item to discuss.
It is for a better world for the current and future generations. These two are the world's heaviest greenhouse gas producers.
U.S. and China Vow Climate Change Cooperation
30 July [Reuters] The U.S. and China signed a memorandum of understanding this week that is being billed as a joint commitment to reach an international agreement to tackle climate change.
The world’s top two emitters said the development elevates climate change as an issue for the countries, which vowed to hold regular consultations on the issue. The agreement calls for cooperation in a range of areas, such renewable energy, sustainable transportation and natural resource conservation, but lacks firm emissions reduction targets.
“Cooperation on climate change, clean and efficient energy and environmental protection can serve as a pillar of the bilateral relationship, build mutual trust and respect, and lay the foundation for constructive engagement between the United States and China for years to come, while also contributing to multilateral cooperation,” the memorandum of understanding says.
A meaningful international climate change treaty is impossible without cooperation from the U.S. and China. Climate will continue being a dominant trade theme between the two countries, carrying significant implications for businesses and supply chains operating within each. .....
In the first round of Sino-US strategic and economic dialogues held in Washington D.C. on July 27-28, the American side proposed to recognize China's market economy status (MES) as soon as possible via a cooperative form of the Sino-US Joint Commission on Commerce and Trade.Why is U.S. ready to recognize China's market ecoomy status? - People's Daily Online
They love that guy over there. PM Wen won’t hold Obama’s umbra that is for sure
Premier Wen meets Kissinger amid inaugural China-U.S. dialogue among retired diplomats
English_Xinhua 2009-10-12 20:54:36
Last edited by xinhui; 12 Oct 09, at 23:30.
“the misery of being exploited by capitalists is nothing compared to the misery of not being exploited at all” -- Joan Robinson
Administration declines to cite China on currency
By MARTIN CRUTSINGER (AP)
WASHINGTON — The Obama administration on Thursday declined to name China as a country that is manipulating its currency to gain unfair trade advantages.
The Treasury Department did say it has "serious concerns" about a lack of flexibility in the value of China's currency against other currencies, and the country's rapid accumulation of foreign exchange reserves including U.S. dollars.
The latest finding is certain to spark protests among American manufacturers who contend that China is keeping its currency at artificially low levels against the dollar to gain unfair trade advantages. The critics say the weak Chinese currency has resulted in lost U.S. jobs.
The decision came in a report the Treasury is required to submit to Congress twice a year. Based on a 1988 law, the administration must designate countries judged to be manipulating their currencies to boost their exports to the United States or make U.S. products more expensive in overseas markets.
If China had been designated as a currency manipulator, it would trigger negotiations between the two countries and could lead to economic sanctions if the U.S. took a case before the World Trade Organization.
Treasury Secretaries John Snow and Henry Paulson, who served under President George W. Bush, sought to increase pressure on China to allow its currency to rise in value against the dollar. However, the Bush administration refrained from actually designating China as a manipulator.
President Barack Obama promised during the campaign to take a tougher stance against China on trade issues during the campaign for the White House last year. But in April and the current report, the administration said China's actions did not meet the legal requirements to be named a currency manipulator.
Obama in September did decide to impose punitive tariffs on Chinese tire imports, agreeing to demands of U.S. manufacturers and their unions that a flood of cheap Chinese tires were costing U.S. manufacturing jobs.
American manufacturers contend that China's currency is undervalued by 20 to 40 percent against the dollar, giving the country a huge trade advantage. An undervalued Chinese currency means that Chinese products are cheaper for U.S. consumers and American products cost more in the Chinese market.
The U.S. trade deficit with China totals $143.7 billion through August, the largest imbalance with any country. Still, the figure is running 15.1 percent below the same period in 2008, a decline attributed to a recession that has depressed consumer demand.
Copyright © 2009 The Associated Press. All rights reserved.
“the misery of being exploited by capitalists is nothing compared to the misery of not being exploited at all” -- Joan Robinson
Avoiding a U.S.-China Trade Showdown
Stephen S. Roach, Chairman, Morgan Stanley Asia
Roya Wolverson, Staff Writer, CFR.org
October 22, 2009
Photo of Stephen S. RoachU.S. Federal Reserve Chairman Ben Bernanke has warned that the global imbalances between the United States and China must be addressed immediately to prevent future economic crises. U.S. policymakers and experts have asserted that an undervalued Chinese yuan is largely to blame for these imbalances and that China's currency should be revalued to help close the U.S.-China trade gap. Stephen Roach, chairman of the Asia branch of U.S. banking giant Morgan Stanley, says that argument is flawed. He says the undervalued yuan is a political "red herring," since currency adjustment or trade sanctions against China would not help reduce the U.S. deficit but shift the U.S. demand for imports to other more costly exporters. Instead, the United States should be pushing China to create a social safety net that would encourage its population to spend more savings on domestic consumption. Roach expresses concern the United States will enact more protectionist policies against China in response to domestic political pressure over rising U.S. unemployment and slow growth.
In the past you've argued that a significant revaluation of China's currency would prove ineffective in resolving global trade imbalances because of the country's fractured political and banking systems. Has your view changed?
This whole exchange rate issue is a red-herring. It won't help the world deal with global imbalances, let alone China. It's true, in the U.S. we've been in a down-trend with the dollar now for seven-and-a-half years and apart from this recent cyclical reduction in our trade deficit, it's had virtually no impact on the structural savings deficit that the United States has. The same thing is true on the Chinese side of the equation. China needs to stimulate internal private consumption to deal with its piece of the global imbalance equation and the currency adjustment of the renminbi is really a relatively insignificant part of that adjustment process.
To what extent does China have the means to reduce its domestic savings and wean itself off of an export-based economy? If not through the exchange rate, then how?
It's got a lot of options to pursue. The one that is potentially most significant would be to build out the social safety net in terms of investing significantly in social security, private pensions, medical insurance, [and] unemployment insurance. There are other things that China can do on the private consumption front like boosting rural incomes, and fostering the development of domestic consumer product and service providing industries. But the safety net is the single most important thing that can be done, rather than focus on the currency.
How big are China-based multinational corporations now and how do they factor into this issue of global imbalances?
We don't have a bilateral trade problem with China. We have a multilateral trade problem with over one-hundred different trading partners.
They're a big deal. Over 60 percent of export growth over the past twelve years has come from growth by Chinese subsidiaries of Western multinationals, but again the problem I have is that too many in the United States, especially the Congress but also Washington, focus on the bilateral trade imbalance between the United States and China. That's just a fundamental economic mistake that's being made. We don't have a bilateral trade problem with China. We have a multilateral trade problem with over one-hundred different trading partners. Last year, the United States ran bilateral trade deficit with almost one-hundred countries. And the reason for that is that we have a savings problem. And when you have a major savings problem, you have to import surplus savings from abroad in order to grow and you run multilateral trade deficits with a broad cross-section of a number of economies. The Chinese piece is the biggest because of the outsourcing decisions made by U.S. multinationals that you alluded to. But if we were to close down trade with China through some ill-begotten trade legislation or currency adjustment, we don't save the deficit. It just goes somewhere else. And they usually go to a higher-cost producer, which taxes the American public.
Do you expect the United States to take more protectionist measures with China in the future, and if so, how will that affect global imbalances?
I hope not, but I wouldn't rule it out. There's a risk in 2010 that narrow-minded U.S. politicians could contemplate once again bipartisan trade sanctions imposed on China. The unemployment rate is extremely high. The discontent from the American work force is extremely high. The inclination for politically inspired China bashing is extremely high, and so [although] trade sanctions against China are wrong [and] not well thought out, there's at least a 30 to 40 percent change they could happen.
Analysts worry that ballooning U.S. debt levels could lead to a devalued U.S. dollar, inflation, and stifled economic growth. Meanwhile, China is worried about its U.S. debt holdings losing value over time. Which country has more to lose from the U.S. debt problem?
It's a much greater risk for China than it is for the United States. The United States is dependent on Chinese exports because we're living beyond our means. We don't save. And when you don't save, you need savings from abroad to close the gap, and you have to run massive current account and trade deficits to [do] that, which means you become reliant on goods made outside the United States. This is the choice that we've made. If we want to redirect our economy away from excess consumption towards more of a savings-based economy, then and only then, can we wean ourselves off of Chinese products. China certainly has gotten the message loud and clear that the external demand underpinnings of the old export-led model aren't going to work the way they used to and that's a critical outgrowth of what's likely to be a multiyear shock to consumer demand growth in the United States. So China knows what's going to happen. The question is do they believe it and are they now formulating strategy on the basis of that possibility. The United States right now is probably operating under the misguided assumption that China's going to be there to just buy Treasury debt for years to come. And the odds are that that will probably not occur, at least [not] on the financing terms the United States has been able to get for selling its debt to international investors for the last several years.
The biggest reason to worry about a more precipitous decline of the dollar would be if the U.S. Congress were to enact bipartisan trade sanctions against China and President Obama were to let them go through and go into law.
Is China putting policies in place to induce domestic consumption?
No, they're not. They're sort of talking the talk, but they're not walking the walk. When they realize that the U.S. consumer is not going to come back with the vigor the sector has displayed over the last twelve years that will be their wakeup call to do more in the way of heavy-lifting on these pro-consumer policies. I think right now, the policies they put in place have been rather disappointing.
There's a lot of speculation about the demise of the U.S. dollar and whether another currency could take its place internationally in future. Do you see that happening? If so, when?
Reports of the demise of the dollar are greatly exaggerated. The dollar is under downward pressure. Over the last seven and half years, the average annualized decline has been about 3.5 percent, which is hardly a disaster. Like any secular downtrend, there's always a crisis scenario that you could worry about. And to me, the biggest reason to worry about a more precipitous decline of the dollar would be if the U.S. Congress were to enact bipartisan trade sanctions against China and President Obama were to let them go through and go into law. That would be much more consistent with a dollar collapse scenario.
Will the dollar be replaced in the long term?
The dollar's role as the dominant reserve currency is going to remain intact for several more decades. There will come a time, hopefully gradually, where the world is more advanced down the road of globalization, [when] economic power is spread more evenly around, not just in the supply side of the world but in the demand side of the world. At that point, it would appropriate to think more about a multi-currency reserve system. It could be along the lines of the IMF's Special Drawing Right, but this is going to take I'd say fifteen to twenty years at a minimum.
Do you see Chinese government shifting toward greater support of entrepreneurship or state-run industry?
No, they're moving much more toward privatization [or], as we say in China, the corporatization of state-owned enterprises. From time to time, there's an ebb and flow in terms of their commitment, but I don't buy the notion that because of a big surge in bank lending you have to call China a more statist economy today than it was going into the crisis. They've been pretty much a government-directed policy machine since the inception of the People's Republic of China sixty years ago. They've backed away from some of that, but you know, there's still an important legacy of public sector involvement and control. It's been shifting [toward liberalization] for the last fifteen years under the guise of state and enterprise reform. It'll continue to shift in the years ahead, but the shifts are uneven. There are periodic setbacks because of the business cycle, such as what we're seeing right now. But I think the direction is set.
Weigh in on this issue by emailing CFR.org.
Avoiding a U.S.-China Trade Showdown - Council on Foreign Relations
“the misery of being exploited by capitalists is nothing compared to the misery of not being exploited at all” -- Joan Robinson
Senior Chinese military general to visit USSenior Chinese military general to visit US
A top Chinese general will visit the United States this month and tour major US bases as Washington seeks to improve relations and reduce the risk of conflict, officials said on Wednesday.
Xu Caihou, vice chairman of the People's Liberation Army Central Military Commission, is China's second-highest ranking military officer and will visit the United States between October 24-31, Pentagon press secretary Geoff Morrell said.
In addition to meeting Defense Secretary Robert Gates on Oct 26, Xu will visit US Strategic Command, Pacific Command and other major bases.
The visit follows a trip by Gates to China two years ago and was part of an effort to improve "trust and transparency" between the two militaries, Morrell said.
"There is huge value in fostering better military-to-military relations between our two countries," he said. "The more transparency there is, the more dialogue that goes on, the less chance there is for a misunderstanding between two very formidable powers on the world's stage."
President Barack Obama, who plans to visit China next month, has highlighted the importance of improving military-to-military cooperation between the countries.
IMO their military relationship is second in importance after their trade relationship.
Btw, I thought the Vice Chairman of the CMC was the highest ranking military officer in China. Is the top officer the Defence Minister? Or is there more than one Vice Chairman or something?
Xinhui is the expert on this. But as far as I know, yes, there is more than one vice-chairman. & yes, the defense minister is one of the VCs & the top ranking officer of the armed forces.
I will answer your question in this thread
Last edited by xinhui; 26 Oct 09, at 00:34.
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