Sun, Feb 15, 2009 page8

• China uneasy with new US regime

  • By Sushil Seth
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  Last month when some former US political heavyweights attended a two-day conference in Beijing to celebrate the 30th anniversary of the normalization of relations between the US and China on Jan. 1, 1979, it was more like an exercise in nostalgia.

  Jimmy Carter, who was the US president at the time, said: “There is no more important diplomatic relationship in the world than the one that has grown between the People’s Republic of China and the United States of America.”

  On the Chinese side, former vice premier Qian Qichen (錢其琛) talked of how over “the past three decades, thanks to our joint efforts, the ship of China-US relations has moved forward, braving winds and waves.”

  It is not unusual to talk hyperbole on such occasions. But it is painful to note that for much of the George W. Bush presidency, there was an attempt to gloss over the developing problems in China-US relations.

  The paramount consideration was not to ruffle the Chinese feathers lest they become difficult on some of the issues confronting the US, such as the wars in Iraq and Afghanistan, North Korean nuclear aspirations, the Iran nuclear issue and the generic question of terrorism.

  Therefore, when Taipei sought to promote Taiwan’s sovereignty, the reaction from Bush and his administration was quite testy and sharp. They didn’t want any spat with the Chinese at a time when the US was over-stretched in the Middle East.

  And it suited Beijing, which used the ensuing power vacuum to expand its political influence and global reach, including lining up oil and other needed resources for its economic growth.

  Within Taiwan, it strengthened the position of the Chinese Nationalist Party (KMT), leading it to win handsome rewards both in the legislative and presidential elections that followed.

  The US frowned on former president Chen Shui-bian’s (陳水扁) “provocative” policy toward China.When Ma Ying-jeou (馬英九) won the presidential election, he donned, among other things, the role of a peacenik when it came to China.

  In the larger scheme of US-China relations, Washington’s obsession with cultivating China by ignoring other issues has simply postponed a much-needed assessment of overall US interests.

  For instance, Bush’s treasury secretary went out of his way to hose down any criticism of China’s trade policies, particularly the charge that it was manipulating its currency to increase exports to the US.

  China’s undervalued currency adversely affected the US in two ways. First, it damaged the US manufacturing industry, as it couldn’t compete with cheap Chinese products. Second, the resulting trade imbalance has enabled China to accumulate vast amounts of dollar reserves.

  Beijing has invested a substantial part of those reserves to buy US treasury notes and other assets. This has given it a potential role in influencing US policies by being its major creditor and a lender at a time when Washington needs dollops of money to fund its stimulus packages.

  The administration of US President Barack Obama will need to grapple with this issue. Timothy Geithner, for instance, touched on it during his Senate confirmation hearings for treasury secretary. He reportedly told the senators that Obama believed that China was “manipulating” its currency for unfair advantage.

  The response from the Chinese ministry of commerce was sharp, saying: “Directing unsubstantiated criticism at China on the exchange-rate issue will only help US protectionism and will not help towards a real solution to the issue.”

  During his presidential election campaign, Obama was forthright on the issue, saying that Beijing had pegged its currency at an artificially low rate.

  “This,” he said, “is not good for American firms and workers, not good for the world and ultimately likely to produce inflation problems in China itself.”

  While this will become an issue in bilateral relations, Beijing is likely to deflect it by focusing on the global economic crisis. For instance, at the World Economic Forum in Davos, Switzerland, China went on the attack to blame the US for all the economic trouble plaguing the world.

  Chinese Premier Wen Jiabao (溫家寶) blamed it all on “inappropriate [US] macroeconomic policies ... unsustainable model of development characterized by prolonged low savings and high consumption ... blind pursuit of profit ... and the failure of financial supervision.”

  However much China might want to deflect the issue of currency valuation and use the buying of US debt instruments as a pressure tactic, the issue will not go away.

  Its undervalued currency, causing trade distortion and imbalance to US disadvantage, will thus be a thorn in US-China relations under the Obama administration.

  For China, Bush was close to an ideal US president whose misconceived policies helped China to expand its political and economic influence. His treasury secretary, Henry Paulson, was quite useful in putting a lid on the issue of currency valuation.

  As China specialist Kenneth Lieberthal has said: “The Chinese are probably one of the few people in the world who were sorry to see President Bush go, and are nervous about his successor.”

  They are also “uneasy about [US Secretary of State] Hillary Clinton. She has, in their assessment, not been a friend of China.”

  And they might as well be, as Clinton is seeking to broaden the agenda of US-China relations beyond the economy. She has said that the US needed “a more comprehensive approach.” In her view, the strategic dialogue of the Bush administration “turned into an economic dialogue,” with China benefitting from it.

  Clinton didn’t specify the issues that might feature in her strategic dialogue. But in any list, Taiwan and Tibet will feature prominently where China would like to buy US silence/support. And that will remain a problem.

  As former National Security adviser Zbigniew Brzezinski, who participated in the 30th anniversary celebrations, said, China could help the US find solutions for a whole set of problems such as the global financial crisis, climate change, Iran’s nuclear program, North Korea’s nuclear ambitions and problems in the Middle East. It’s quite a list, allowing China to play quite a few of its own cards.

  Looking at it,US-China relations are not likely to have an easy ride under the Obama administration. Both sides, though, will be keen not to let things get out of control, especially in the midst of an ongoing global economic crisis.

  Sushil Seth is a writer based in Australia.
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