Striking a Balance

　　China and the U.S. seek to repair bilateral relations following a year of strategic distrust

　　As China-U.S. affairs hit a rough patch and the world economy struggles to recover through adjustment， the sixth round of China-U.S. Strategic and Economic Dialogue (S&ED) held on July 9-10 in Beijing was intended to boost confidence in bilateral relations.

　　Chinese President Xi Jinping and his U.S. counterpart President Barack Obama reached a consensus of building a new type of major power relationship featuring non-conflict， non-confrontation， mutual respect and win-win cooperation in June last year. The concept of a “new type of major power relationship” was designed to foster a positive vision for Sino-U.S. relations.

　　However， bilateral relations subsequently worsened in the following year， leading to “strategic distrust.” The Obama Administration attributed tensions between China and Japan， the Philippines and Viet Nam over maritime territorial disputes to China’s display of military power， accusing the latter of attempting to change the status quo and acting aggressively. China countered these claims by saying that the tensions were caused by provocative actions taken by these countries against China. From China’s point of view， the United States appeared to deviate from its neutral position and took sides with countries that confronted China， encouraging their provocative actions.

　　As the Ukraine situation intensifies and relations between Russia and the United States deteriorate， the Obama administration has not diverted its strategic focus from the Asia-Pacific region. Rather， it has increased its rebalance to Asia by enhancing military deployment and forming alliances in the region. President Obama said the United States will lead the world for the next 100 years and will offer protection to its allies. Beijing has interpreted this as attempts to contain China by military measures and countering the so-called Chinese Monroe Doctrine.

　　Adding to the poor state of affairs， the United States has persistently accused China of infringing upon its cyber security， even after revelations of the U.S. secret surveillance program showed that the U.S. has organized massive wiretapping and surveillance activities against a number of countries including China. On May 19， the United States announced an indictment against five Chinese military officers for alleged cyber theft of U.S. corporate secrets. In response， China declared that it would call off a cyber-security team formed under the framework of the China-U.S. Strategic Dialogue， which was established upon the request of the United States with the purpose of avoiding conflict and carrying out cooperation on cyber security.

　　In the past 40 years， in spite of frequent accusations hurled between China and the United States， they have not regarded each other as a subversive force for their respective development. Mutually beneficial cooperation， indeed， remains the norm for bilateral relations.

　　However， at present， suspicions and dislike between the two countries have spiked amid speculation over whether or not the United States would intervene if war broke out between China and the Philippines or Japan. As the center of global power rapidly shifts to Asia， any actions by the two countries to protect their core interests are quickly interpreted as aggression. The United States is troubled by China’s maritime policy adjustment in the South and East China seas while China sees the dangerous inconsistency of the Obama administration’s China policy as a major threat to its sovereignty. The two sides faced a pressing need to restart a systematic dialogue to recover confidence—and this year’s S&ED was aimed at fulfilling that purpose.

　　At its opening ceremony， Xi said that problems in China-U.S. relations are not to be afraid of as long as both sides work to solve them. “Building a new model of major-country relationship between China and the United States is unprecedented in history. There is no ready-made experience from which to learn，” he said.

　　The talks reaffirmed the consensus of building a new type of major power relationship and helped to put a stop to the downward spiral of bilateral relations. The Chinese participants believed that the United States should recognize the crucial importance territorial integrity and national sovereignty hold for China and not interpret China’s defense of its territory as the pursuit of regional hegemony.

　　Rebalancing economies

　　At present， the major economies of the world are trying to redefine their respective responsibilities and obligations from an international perspective.

　　The United States’ economic revival has not been as strong as expected but is better than some had feared. The eurozone has passed through the darkest stage of its debt crisis and its economic situation should stabilize， although some structural problems have yet to be settled. Japan is showing initial signs of emerging from its age of deflation， but weakened stimulus， higher consumption tax and the government’s mounting debt has crippled the effectiveness of Abenomics. Emerging economies such as India， Russia， South Africa and Brazil are struggling with inflation and capital outflow， bearing the brunt of a possible global economic slowdown.

　　As the backbones of the global economy， China and United States’ ability to coordinate macroeconomic and financial policies will determine the prospects of recovery. During the last financial crisis， the United States and China contributed to stabilizing the world economy by launching quantitative easing measures and economic stimulus programs. To secure the economic recovery， the two countries have now shifted gears to minor stimulus and more focused easing measures. Under such circumstances， it’s time for Europe to implement more daring easing policies and carry out the targeted longer-term refinancing operation.

　　The most important mission for the S&ED is to promote cooperation between China and the United States in terms of economic reform and restructuring. Currently， China is trying to transform its economic growth pattern and encourage domestic consumption and a greater role for private companies. Meanwhile， the United States seeks to boost its savings rate， beef up infrastructure construction， reform pension and medical care systems and adjust taxation， technical education and employment systems. The two countries’ respective economic agendas complement rather than conflict with each other.

　　Talks on a Bilateral Investment Treaty have made remarkable progress after 13 rounds of negotiations over a five-year period， with a pre-establishment national treatment plus a negative-list approach having been squared away. This treaty is viewed as one of the most significant deals to be have been reached since China first joined the WTO years ago. Once a high-level Bilateral Investment Treaty is reached， the two countries’ industrial adjustment will receive investment support from each other’s companies.

　　Another eye-catching topic at the annual S&ED was China’s exchange rate policies. The U.S. side accused China of manipulating the yuan to support China’s exports， while China believes the depreciation of its currency is a result of the global market’s expectation of a dollar appreciation and the slowing economic growth of China.

　　Thanks to the improvement of the Chinese economy in the second quarter of the year， the yuan’s exchange rate rose a little bit against the U.S. dollar before the opening of the sixth S&ED.

　　As of now， Washington has done little to relax restrictions on exports of hi-tech products to China， and reduce discriminatory treatment for China’s IT products in the U.S. market， nor has it carried out the long-delayed quota reform plan in the International Monetary Fund—all in addition to the poorly handled cyber security issue.

　　China and the United States have become the most important economic partners in the world and their partnerships with other countries are closely interwoven with political considerations. But nevertheless， economic concerns must ultimately be supported by positive bilateral relations.

　　By An Gang

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