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US, China Try to Reset Ties

Jim Stevenson | Washington 27 May 2010

Direct talks on the economy and security between the United States and China have concluded in Beijing. The Strategic and Economic Dialogue produced some minor agreements, but overall seems to have reset relations between the countries.

In the months leading to the annual meeting, U.S.-China relations were tense. U.S. arms sales to Taiwan, the U.S. visit of the Dalai Lama and the freedom of the internet speech by Secretary of State Hillary Clinton all seemed to suggest relations were heading downward. But as research fellow Dean Cheng of the Asian Studies Center at the Heritage Foundation says, the talks in Beijing helped to regain some diplomatic stability.

"This dialogue basically reset things and allowed everyone to sort of air their concerns to hopefully have genuine frank discussions," said Cheng.

He also says the talks illustrated China's emerging role in the world.

"China once again has reminded the world that is in many ways the next up and coming power," he said. "And the United States, depending on what comes out at the other end, may or may not have obtained Chinese cooperation with regards to North Korea and Iran. That is probably optimistic. But at least things are not on a downward path," Cheng added.

Tensions on the Korean peninsula highlighted discussions. And Richard Bush, the director for the Center for Northeast Asian Policy Studies at the Brookings Institute, says the talks came at the right time.

"This is exactly the sort of issue that Strategic and Economic Dialogue was created to address. It is actually quite timely that Secretary of State (Hillary) Clinton and her Chinese counterparts were talking in the wake of the South Korean government's investigation report," he said.

While the situation between North and South Korea remains fluid, Bush says cooperation will likely result to address the North's apparent provocation.

"China was not as quick to accept the report," Bush said. "It remains to be seen what they will actually do. But I think one can be a little bit optimistic that they will come around and join the United States and South Korea in some sort of multilateral action against North Korea," he said.

But Dean Cheng says the Economic and Strategic Dialogue itself likely did not develop any specific future cooperation between the United States and China.

"It is not really clear how much cooperation there actually is between the two nations. A 200 person delegation is a great way to have lots and lots of dialogue. As to getting things done, that is a lot less clear," said Cheng.

He says the global economic downturn has impacted China's export power to the point where Beijing is willing to make some changes in order to maintain domestic control.

"Exports are going to be dropping, which opens the very ugly prospect of domestic unrest. So the Chinese government is now trying to balance economic policies that would satisfy American demands with economic policies that will help them (the Chinese government) retain power," Cheng said.

The dialogue also touched on a Chinese trade policy viewed as protectionism. Richard Bush says the so-called indigenous innovation policy will not help China in the long term.

"Indigenous innovation and doing government procurement only from Chinese firms, which is an implication of this policy, is not good for China. It will create inefficiencies and distortions in their economy if a major market for good is blocked for foreign products," Bush said.

He says China's economic dependence on outside companies will eventually force a change of policy.

"This sort of policy at the central level, at the provincial and local levels really puts China crosswise with a very important constituency for China, and that is international business," Bush said. "Major American corporations are the ones that provide the political support in the United States for U.S.-China relations," he said.

Beyond the talks, there is the potential that U.S. lawmakers are likely to press for China to be formally declared a currency manipulator. Beijing has indicated it will allow for some further appreciation of its currency, but has not indicated when action might be taken.



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