As the United States and China wrap up their two-day “Strategic and Economic Dialogue,” it’s more apparent than ever that the two find themselves in a marriage that neither can easily dissolve and that neither fully wants.
(Cross-posted at River Twice Research.)
The speeches struck all the rights notes – “the United States and China share mutual interests,” President Obama announced. “If we advance those interests through cooperation, our people will benefit, and the world will be better off – because our ability to partner with each other is a prerequisite for progress on many of the most pressing global challenges” Those sentiments were echoed by both Hillary Clinton and Timothy Geithner in an op-ed published in the Wall Street Journal. The Chinese delegation spoke of the two nations as traveling in the same ship, a ship which was wracked by the global financial storm of the past year. In general, the rhetoric could not have demonstrated more clearly that both see themselves as locked in a relationship of mutual dependence.
Yet the words of officials belie the more ambivalent feelings of both governments and especially of domestic public opinion in both countries. The best-selling book in China over the past months has been a nationalist screed entitled “China is not happy,” which argues for detachment from the United States as well as divestment from the U.S. dollar and which warns darkly that the ultimate goal of America is to keep China down. In the United States, there remains a strong current of distrust that sees Chinese policy around its currency as purposely aimed at conferring illegitimate advantages for Chinese goods and which views the authoritarian nature of the Chinese government as an absolute obstacles to future concord. And many U.S. economists do not believe that China – reliant as it is on state-spending rather than domestic consumer consumption – has a viable model for long-term growth.
While there are positive signs in the discussions around alternative energy, climate change, and the long-term security of the dollar, what’s striking is how little has changed between the two as a result of the economic crisis. In fact, the events of the past months have propelled the two closer together, contrary to the arguments of those such as Niall Ferguson who are now predicting an impending divorce. The U.S.-China trade deficit is still immense, running at an annualized rate of nearly $250 billion a year in U.S. imports and $60 billion in exports, down from almost $340 in imports in 2008 and nearly $70 billion in exports ( http://www.census.gov/foreign-… ), but still considerable given the sharp contraction in overall economic activity globally. And China has been adding to its dollar reserves every month and has been a steady buyer of U.S. debt, which means it had become an even more significant creditor of the U.S. and a facilitator of U.S. government spending.
For now, elites in both countries speak the mantra of closer integration, but it’s fair to say that their views do not accord with popular sentiment. It’s also fair to say that neither government is prepared to face the real consequences of their economic relationship, which is a loss of control. China wants to diversify away from the dollar, but it has no alternative; the United States wants to be less dependent on China, but there is no other ready source of loans.
So this phase of the dialogue ends on promising notes. But reality will be harder to live, and its ramifications difficult for both sides to accept. For a 21st century relationship, this looks increasingly like a 19th century marriage, one of convenience and necessity rather than love and affection and one that is nearly impossible to end even if both parties desire it.
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