The beleaguered Bush White House risks adding a bungled relationship with China to a laundry list of policy problems at home and abroad. It appears wrong-footed by the giant strides being made by China in manufacturing, trade and increasingly in diplomacy.
US Defense Secretary Donald Rumsfeld has finally made his first trip to Beijing. He came dragging a chain of his skepticism about the pace and purpose of China's armaments build-up. The Chinese obligingly showed a thoughtful Rumsfeld and his aides around the headquarters of the Second Artillery Corps, which oversees the nation's nuclear missiles. They were the first foreigners ever admitted to the compound. Nobody is betting on an early return invitation to the equivalent NORAD facility deep in the Colorado Mountains.
Meanwhile, US Treasury Secretary John Snow was trudging through Shanghai and Chengdu continually grumbling about an undervaluation of the yuan. Chinese Finance Minister Jin Renqin effectively urged him to put a sock in it, reiterating for the umpteenth time that the country would only move further on the currency float at its own pace and volition.
Snow also brightly suggested there should be more credit cards in China, to help stimulate domestic spending and encourage a switch from export to domestic growth, thus reducing the obese trade balance with America. It could be argued that a lot less debt on credit cards in the US might achieve a similar result, instead of swingeing barriers to textile imports.
Snow headed a somewhat lackluster US delegation to the G20 summit of finance ministers and central bankers held at the curious and costly Epoch City venue in Xianghe. Federal Reserve chairman Alan Greenspan, who steps down early next year, made a rare foreign gabfest appearance. Reportedly, the People's Bank of China Governor Zhou Xiaochuan buttonholed the 79-year-old and the pair held a conversation in "Hhispers". Observers said it is well known that Zhou speaks fluent English, so he would have no need for an interpreter. That is more than can be said for many native English speakers who have extreme difficulty deciphering Greenspan's convoluted utterances. However, his departure means the loss of a safe pair of hands at the Fed. His successor, Ben Bernanke, will find an 18-year act, with numerous curtain calls, a hard one to follow. Good moneymen are thin on the ground in the administration.
There has not been a highly regarded Treasury Secretary since the patrician Wall Street multimillionaire Robert Rubin, who stepped down with exquisite timing in 1999. A consistent advocate of cutting deficits, he left Bill Clinton with a balanced budget and the Dow Jones index standing well over 11,000. The G20 was established in Berlin and has only been going for six years. It has no permanent staff and no authority to make policy – still the nine-hole golf course in Epoch City was excellent. The final communique was as anodyne, as might have been expected – with one exception. In paragraph two it said: "He are determined to implement the necessary fiscal, monetary and exchange rate policies, and accelerate structural adjustments to resolve imbalances and overcome risks."
A protectionist Congress
The language reflects concern that protectionists in the US Congress will continue to wind up their pressure, given the US "Imbalance", which is a current account deficit now nudging a ghastly 6.5% of GDP.
China is seen by lawmakers as a threat rather than an opportunity. That is illogical and a pity. China's trade surplus tops US$70 billion but that is barely 10% of the ballooning US deficit. It is less than half that of Japan. The US buys more than it sells from almost everybody. Why should China be blackballed from taking majority stakes in American companies in the energy or any other sector? Its remarkable economic performance has underwritten world growth while the traditional engines of Europe and North America have been spluttering.
The powerhouse of the industrial world is inexorably tilting. More than half the expected 600-million-ton global output of steel will be forged in Asia this year for the first time ever, with China in the vanguard.
The inaugural East Asia Summit to be held in Kuala Lumpur in mid-December will be attended by the 10 ASEAN countries plus China, India, Japan and South Korea, with Australia and New Zealand making up the numbers. The US has not been invited to participate and cannot even press its nose to the window as an observer. Western diplomats are still trying to get a handle on what sort of political economic and security issues will be discussed. It is something of a mystery. No agenda has yet been circulated. The only givens are that the gathering will speak for around half the world's population and that China will host a 2006 meeting.
George Bush visited Beijing during November. He can hardly be called a lame duck President, with three years to serve on his term, but he may be walking with a slight limp.
Malcolm Surry is former Business Editor of the South China Morning Post in Hong Kong.
C. Richard D. Amato, US-China Economic and Security Review Commission chairman:
"China is America's most important relationship 'on balance ' the trends in the US-China relationship have negative implications for the long-term economic and security interests of the United States."
Dr Margaret Chan, the WHO's top official in charge of monitoring bird flu:
"While we cannot predict when or if the H5N1 virus might spark a pandemic, we cannot ignore the warning signs. For the first time in human history, we have a chance to prepare ourselves for a pandemic before it arrives." John Snow, US Treasury Secretary on US pressures on China to widen the RMB trading band: "The fundamental issue here with us and the Chinese is the pace with which they move. We know they can't go all the way there tomorrow. I don't think they respond very well to threats."
China's central bank website: "We will gradually push forward reform of the exchange rate mechanism, establish a market-oriented, managed floating exchange rate system and maintain the basic stability of the yuan at a reasonable and balanced level."
Chinese Commerce Minister Bo Xilai, after announcing the three-year agreement to curb China's textile exports to the US: "I am aware of the pressure given by the US [textile] industry but it doesn't mean who shouts loudest is most reasonable."
US Defense Secretary Donald Rumsfeld on China's alleged secrecy surrounding its military expansion: "It's interesting that other countries wonder why they would be increasing their defense effort at the pace they are and yet not acknowledging it."
EU Environment Commissioner Stavros Dimas on concerns that China may not reduce its pollution before the 2008 Olympics: "I'm sure the atmosphere will be cleaner and the environment will become better in Beijing and even the whole country, as the Chinese Government is working out measures to protect the environment, including by developing renewable energy."
The International Energy Agency in its Energy Outlook 2005 report: "The increase in emissions from China alone will exceed the increase in all the OECD countries and Russia combined."
Greenpeace China spokesman Szeping Lo on China's environmental problems: "The government is not just sitting idle, but it is also clear they are not doing enough to cope with the current crisis."
New York State Agricultural Commissioner Nathan Rudgers on the challenges of selling American agricultural products, including dairy goods, to the Chinese: "They are not used to eating something in a bowl that is not warm. It's rare they would eat something without chopsticks. Being [that] fresh milk has been hard to come by, the concept of taking cold cereal, putting it in a bowl and pouring fresh milk on it is totally foreign to them."
Allan Behm, a strategic analyst and former senior Australian defense department official on China's rise: "It's simply unprecedented. You have the world's largest and most dynamic population coming into its own as an economic, political and strategic force."
Lu Yiyi, senior research fellow at the London-based international affairs institute Chatham House: "China now accepts that the US is the world's only superpower, and can deal with it, but the US hasn't come to an understanding of what China is."
The OECD in its first review of China's agricultural policies: "The administrative barriers to rural-urban migration, permanent residence [rights], land markets and tenure security should be removed or at least relaxed."
Hong Kong Democratic Party chairman Lee Wing-tat on the condition under which his party would drop its demand for direct elections by 2007: "If Hu Jintao would face the international media and say that he will give us a firm commitment and openly support universal suffrage by 2012, we would accept that. If he doesn't, how can the public believe he's sincere about giving them full democracy?"