What to Expect from President Hu’s Visit

What impact will the Chinese president’s visit have on Sino-American relations?

Chinese president Hu Jintao arrives in Washington DC today. His state visit comes at a time of considerable tension in Sino-American relations. Even as the two powers are heavily interdependent economically, discord has emerged on monetary and climate policy. With America mired in recession, protectionism rears its ugly head once more while China, still rising, has become more assertive.

Washington’s newfound closeness to New Delhi meanwhile has prompted the Chinese to intensify their own relations with Pakistan, India’s western neighbor and foe.

China’s seeming lack of concern over North Korea’s nuclear ambitions and November’s shelling of a South Korean island fueled American apprehension about China’s policy on the peninsula last year. China’s revisionist posturing in the South China Sea moreover has antagonized neighbors in Southeast Asia and strengthened the belief that China stopped rising peacefully.

It is all the more reason for the two nations to build a “positive, cooperative and comprehensive relationship,” as Secretary of State Hillary Clinton put it last week. Hu’s state visit should be a step in that direction.

Rebalancing of trade

China last year surpassed Japan as the world’s second largest economy and will likely continue to grow at a staggering pace in the years to come.

In 2010, Treasury Secretary Timothy Geithner said Friday, American exports to China amounted to more than $100 billion. “They’re growing at about twice the pace of our exports to the rest of the world,” he added which means that the country is set to become America’s largest trading partner by the end of this decade.

There is an imbalance in the relationship however in that China sells almost three times as much to the United States as the United States sell to China. It is why, at the G20 summit in November, American president Barack Obama suggested that the world’s surplus economies should submit to a rebalancing of global trade. China and Germany, both heavily dependent on exports, resisted and the plan failed. From the Chinese perspective, there is nothing fair about such efforts.

International relations analyst Thomas Barnett previously explained what is driving China’s “seemingly selfish economic strategy.” He predicted in December that China, “already losing its cheap labor advantage right now,” is set to stockpile elders from here on out at a pace never witnessed before.

By the middle of this century, more than four hundred million Chinese are expected to have retired — more than America’s total projected population by that time.

But in addition, China is now expected to cover the spendthrift West’s need to boost exports while also serving as income elevating engine for the rest of the world’s developing economies — largely through the Middle Kingdom’s ravenous resource demands.

Barnett warned that Beijing interprets attempts to “rebalance” world trade at the cost of Chinese competitiveness as “nothing less than an attempt to destroy the ruling Communist Party’s primary source of political legitimacy — namely, China’s ongoing per capita income expansion.”

Currency appreciation

The United States have been urging China to allow its currency to appreciate at a faster rate, complaining that it keeps Chinese manufacturers artificially underpriced. China won’t move on currency however as long as it has millions still living in poverty and millions more dependent on exports to the West.

Chinese Premier Wen Jiabao defended China’s monetary policy in Brussels last year. On the whole, China’s economic development “still lacks balance, coordination and sustainability,” he has said. A sudden increase in the yuan‘s value, as the Americans are calling for, would bring “disaster” to China he warned. “Factories will shut down and society will be in turmoil.”

On Friday, Geither pointed out that the value of the Chinese currency alone does not shape the long-term investment decisions of American companies. Inflation is another crucial element.

Chinese inflation is much more rapid than the United States now. Chinese inflation is probably going to be more than twice, three times American inflation rates for a long time to come.

As a result, exchange rates, in real terms, are appreciating — “at roughly a pace of about 10 percent a year,” according to the secretary. “And that’s a very substantial material change,” he admitted.

Military expansion and competition

China’s strategy seems aimed, before anything else, at perpetuating the country’s economic growth and ensuring domestic tranquility. Its foreign policy is an expression of these objectives.

Chinese foreign policymakers understand that they cannot ignore what happens outside of China anymore. Their country is a great power again so they are asserting their claims in the South China Sea, vying for influence in Central Asia, obstructing international climate change legislation at Copenhagen, squabbling with Google over Internet freedom, trying to water down sanctions against Iran and refusing to outright denounce North Korea despite its evermore bellicose rhetoric and destructive behavior.

In order to boost China’s posture and protect its expanding interests around the globe, the People’s Liberation Army is spending many billions of dollars buying equipment (notably from Russia) and developing new technologies.

Reports of carrier killing missiles and stealth fighters are often exaggerated in American analyses as is the expansion and modernization of the country’s naval forces. The United States should not have to worry about China’s navy however, certainly not in the short run. The US Navy will remain paramount in the Asia-Pacific for decades to come.

China will become a maritime power at the same time as its dependence on the imports of raw materials from other parts of the world outside of East Asia increases. In the future, Chinese armed forces may well be called upon to protect the country’s burgeoning international trade which is precisely what the United States have been doing for the last half century.

The United States fear that more Chinese power will effectively amount to less American influence. Especially as both countries cope with upheaval at home, the risk of escalation of otherwise minor disputes is very real. In interviews with The Wall Street Journal and The Washington Post, President Hu professed this week that China and the United States “should abandon the zero-sum Cold War mentality” but there are hardliners in his own administration and party whose views are no less obsolete.

Strategic reassurance

Approaching international relations as multipolar and assuming that China and the United States shared fundamental threats and interests — ranging from climate change to economic stability to Islamic terrorism — the Obama Administration initiated a policy of strategic reassurance when it come to power. It doesn’t appear to have been working so there is a need for a new framework of Sino-American cooperation.

Former national security advisor Zbigniew Brzezinski proposed that Presidents Hu and Obama use the opportunity of this week’s state visit to lay out a charter that would “provide the framework not only for avoiding what under some circumstances could become a hostile rivalry but also for expanding a realistic collaboration between the United States and China.” Learning from Cold War détente to define alliances and spheres of interest and institutionalize regular high level meetings may be another way to defuse tension.

Despite high hopes and undoubtedly optimistic proclamations of friendship and good will, Hu’s visit doesn’t seem likely to produce the sort of refinement of the Sino-American symbioses that is highly desirable if not outright necessary today. In the absence of formal agreements his state visit is a chance to build trust however and it is a reminder that differences aside, China and the United States realize that they need each other — and will continue to need each other well into this century.