IN RECENT days President Obama, ahead of his arrival in Beijing yesterday on a nine-day sweep through east Asia, described China as a “vital partner, as well as a competitor”. The formula is a significant contrast to the George W Bush description of the relationship as one of “strategic competitors”, reflecting above all an evolving understanding of the complex interdependence and economic interpenetration of the world’s two great powers.
China holds more than $1 trillion of US debt and the latter is currently, the single-biggest market for China’s export hungry economy. The country is both the world’s largest producer of many cheap goods that Americans hardly make at all now – tee shirts and toys, for example – and a favoured place for US multinationals to assemble more complex products for the US and other markets. Some 60 per cent of Chinese exports accrue to foreign-invested enterprises – most of the value added, and thus most profits, accrue to these multinationals, not to China. Gone are the days when the US could simply look at the relationship as “them and us” – now them is us.
Substantive matters on a crowded bilateral agenda include US hopes that China will revalue its currency and encourage consumers to spend more, opening markets further to US goods; climate change; efforts to strengthen a still-fragile global economy; trade friction over new US duties on tyres and steel pipes; North Koreas nuclear programme; the war in neighbouring Afghanistan; and Pakistan, a long-standing ally of China that is at the centre of Obamas foreign-policy concerns. Mr Obama is also expected to raise the thorny issue of China’s human rights.
Pre-empting his inevitable expressions of concerns about the yuan, currently in effect pegged to the sliding dollar and causing US, EU and regional exporters considerable pain, China hinted last week that it might allow appreciation of its currency, though few believe it will do so in the short-term. But the pressure is increasing. Finance minsters of the Asia-Pacific Economic Co-operation group, which includes China, the US, and Japan, last week “agreed that flexible prices, including exchange rates and interest rates” are important to achieving “sustainable global growth”.
Mr Obama’s broader message to the region is that, after what many see as years of neglect under Bush, the US is determined to re-emphasise its identity as a Pacific nation and to re-engage. Having grown up in Hawaii and Indonesia, the president is the first president of the United States really with an Asia-Pacific orientation, Ben Rhodes, his deputy national security adviser insists. “He understands that the future of our prosperity and our security is very much tied to this part of the world.
But the region also knows that Mr Obama faces real difficulties back home in re-engaging. With unemployment at 10 per cent, Democrats in Congress are deeply unhappy about a liberalising trade agenda and reluctant to ratify deals like the still-pending 2007 US-South Korea trade agreement. Convincing Asia will take more than soft words.