<i>US & China building strategic mutual trust</i>

28 January 2011, 18:00 PM

Mahmood Hasan

Photo: newsinfo.iu.edu

President Barack Obama played host to Chinese President Hu Jintao from 18-21 January 2011 in Washington. This was Hu Jintao's second state visit to the US and came amid growing mistrust between the two largest economic power houses of the world. Since US formally recognized the People's Republic of China in January 1979, visits at the highest level have been exchanged at regular intervals and dialogue continued. President Barack Obama visited Beijing in November 2009. With this visit the two leaders have met for the ninth time in the past two years. Western media and US lawmakers have been particularly critical of China over several issues. Some of the issues that bedevil US-China relations are: China manipulating the value of its currency Yuan (renminbi); China's enormous trade surplus at the expense of US; Washington inviting Dalai Lama at the White House despite Chinese warnings; US supplying $64 billion worth arms to Taiwan; China violating Intellectual Property Rights (IPR); deteriorating human rights in China (Liu Xiaobo, Nobel Laureate for Peace 2010 put to jail); China's aggressive claim over some islands close to Japan; China's friendly policies towards North Korea and Iran; China's rapid growth in military strength and technology and other irritants. The 41-paragraph US-China Joint Statement issued on 19 January, dealt with all the issues of concern between the two sides. The document is divided into six parts (i) Strengthening Relations; (ii) Promoting High-Level Exchanges; (iii) Addre-ssing Regional and Global Challenges; (iv) Building a Comprehensive and Mutually Beneficial Economic Partnership; (v) Cooperating on Climate, Energy and the Environment; (vi) Expanding People-to-People Exchanges. The currency issue that angers US the most has been addressed at length. United States accuses that the undervalued Chinese 'Yuan' is the cause of American economic woes. Because of cheap currency, low-cost Chinese exports have flooded US markets and pushed out American factories causing huge unemployment in US. China has promised to move towards floating market value of the 'Yuan', albeit at its own pace. Actually the 'Yuan' has appreciated in value between 2005 (Rmb 827) and 2010 (Rmb 674) to the US dollar. To pacify the Americans, China signed procurement deals with US companies worth $45 billion. China is now the second largest economy of the world with a GDP of $42 trillion (2010), behind United States $142 trillion (2010). At the current rate of growth (103%) China is projected to overtake US by 2020. No wonder Washington is worried. China currently has the largest foreign exchange reserve of $285 trillion and has invested over $800 billion in US treasury bonds, apart from billions invested in manufacturing in the US. It is deeply concerned that US Treasury's 'Quantitative Easing' (QE) policy to sell $600 billion worth of bonds will depreciate the value of the dollar and consequently its investments and reserves. China has asked US to refrain from taking any step that reduces the value of the dollar. Hu Jintao before going to Washington has said that US-dollar-dominated international currency system is a "product of the past." China would like to see a new international currency that is stable and easily convertible. The joint press conference also centered around three main issues devalued 'Yuan'; Korean peninsula and Iran; and Human Rights situation in China. Both Obama and Hu Jintao spoke candidly about their respective positions on these contentious issues. On violation of Human Rights the Senate and the media repeatedly attacked the Chinese President. Hu Jintao replied that China had a huge population and a developing country in a crucial stage of reform. China still faces many challenges and lot needs to be done in terms of human rights. China is willing to engage in dialogue and exchanges with the US on the basis of mutual respect and principle of non-interference in each other's internal affairs. While Hu Jintao admitted to shortcomings on the issue, it was indeed ludicrous for the Americans to lecture China from a moral high ground, particularly when Guantanamo Bay is yet to be dismantled. There is no doubt that over the past few years China has become more confident of its economic prowess and its military strength and has gone about asserting itself. Immediate neighbours Taiwan, South Korea, Japan, India and ASEAN countries view China's rise deeply worrying. For the US the disadvantage is that in the Asia-Pacific region it does not have NATO-like alliance to contain 'communist China.' Though it has separate defense pacts with Japan, South Korea and Taiwan it has failed to give leadership to the smaller nations in the region. China naturally is trying to fill in the vacuum. US-China relations are a matter of analysis and debate, but one thing is clear that the significance and influence of US-China relationship is no longer a bilateral affair -- it has gone beyond. Regional and global issues today are influenced and affected by the equation that exists between the two economic power houses. It would be naïve to conclude that Obama succeeded in pushing over Hu Jintao. On the contrary, Hu Jintao stood his ground on all the contentious issues, but wrapped them in soft diplomatic language. He skillfully demonstrated that China is neither a coward nor a bully. The Washington Post assessed the visit with the heading "Summit yields gains for both China and US." The Chinese media also called the visit a great success. Actually relations between the two countries, having vastly different political systems, were never on an even keel. Relations between them have always been complex and multi-faceted and fraught with frictions and irritations. They are simultaneously adversaries in some areas and partners in others. Fortunately China and the US are neither enemies nor allies. It may be pointed out that both the leaders will be coming to the end of their term in 2012. President Barack Obama finishes his first term in November 2012 and may seek reelection. While President Hu Jintao will be completing his term and handing over power to Vice President Xi Jinping at the end of 2012. Both leaders are under obligation to leave a legacy for their successors that relations between the two countries have been beneficial for their people and the world. The summit between the two leaders was expected to set the course for at least the remaining period of their terms. The overall tone of the summit was more high level contacts and dialogue and more cooperation between the two countries. On China's rise as a major power President Obama said he welcomed China's rise but wants to make sure that the rise is done in a way that reinforces international norms and enhances security and peace as opposed to it being a source of conflict. He went further saying that frictions and irritants have to be removed to build "strategic mutual trust" between the United States and China. Mahmood Hasan, former Ambassador and Secretary, is Policy Advisor, Center for Foreign Affairs Studies.