The meeting of the Group of 20 nations in April may be remembered not for the US$1 trillion-plus pledged to abate the financial crisis, but as the moment the world entered the G2 era. A successful US-China relationship is critical to the world’s economic and existential future, and will require painful compromise from both sides. China, for its part, will have to take action that goes beyond its mere self-interest.
Ahead of the summit, Beijing proved more than willing to scold the US for its financial profligacy, and justifiably so. It also expressed concerns about its US-dollar holdings, going so far as to call for a new global reserve currency in place of the dollar.
Of course, this ignores the role China played in creating the global imbalance that, although not responsible for the global financial crisis, has contributed to America’s current economic plight. Beijing chose to buy US Treasuries to maintain both the value of its riches and its currency regime – and thereby helped bankroll an unsustainable US credit boom. Furthermore, by continuing to effectively peg its currency to the dollar, China’s talk of a replacement currency is both unrealistic and disingenuous.
But the proposal sent out a clear message: China wants to have more influence on the global financial order. (And, for the record, Beijing emerged from the G20 with more or less what it wanted: pledges to boost IMF funding and trade finance, and to look at restructuring IMF and World Bank voting rights.)
As participants in the bilateral relationship that affects all others, China and the US will have to reach compromise solutions on various issues. A deal on legacy issues related to climate change, for example, is necessary for ending the current standoff. Both sides must accept the contributions they have made to environmental degradation and set targets for reducing emissions. In doing so, they can set the standards for others to follow.
However, it is the North Korean nuclear issue on which China could really set out its stall as a global leader. While neither Washington nor Beijing can dodge accusations of pursuing foreign policy strategies born primarily of self-interest, America has it right on North Korea. A nuclear missile strike by Pyongyang may be unlikely, but the possibility of transfer of fissile material or nuclear technology to other rogue states or terrorist groups makes this an issue of global consequence.
China has long avoided confrontation with North Korea for fear of collateral damage to the mainland’s economic and political stability. This is an increasingly unsustainable position. That China joined the UN Security Council in condemning the North’s April 5 rocket launch is encouraging. Pyongyang, however, has now threatened to withdraw entirely from the six-party talks. China remains the only country with the leverage to bring the rogue state into line. It’s time to use it.
The G2 won’t be able to solve all the world’s problems. But it is difficult to imagine real, lasting solutions without them.